Correspondence

IP Insight: July 2014

Published 29 July 2014

1. Using IP to raise finance

Adam Tavener, Chairman Clifton Asset Management plc

British brands continue to rise in value - with the top 50 brands increasing by £37.3bn over the year to £253bn, according to the latest Brand Finance study.

This is of course great news for British industry and as Brand Finance CEO David Haigh rightly states:

stands as a testament to a thriving creative industry.

But, much as we would like to, we can’t all be Vodafone (now Britain’s most valuable brand valued at £17.pbn) and while we’d like to think that all UK companies are making the most of their intellectual property, many aren’t even aware they have any.

Globally IP has become one of the most valuable, but least-exploited assets in business, especially with small and medium-sized enterprises (SMEs).

Last November’s Banking on IP? report, commissioned by the Department for Business, Innovation & Skills, recognised IP as an important asset class which can be used for business funding; and a number of independent reports also concluded that company value is now largely dependent on intangible assets, with estimates ranging from 70% to 80%.

So, such an important asset, which will be held by most businesses in some form, must be being widely used by the UK’s SMEs to access cash which the high-street banks are often unwilling to part with? Well, no actually.

The Banking on IP? report agreed that the main banks seemed unwilling or unable, to recognise the value of intellectual property held by businesses - and it’s not just the banks who do not understand the value of IP held by businesses. I regularly meet dynamic business owners used to developing new ideas and products and am amazed at how few of them realise the monetary value that inventiveness and brand actually holds for them.

In fact, research that we have conducted across almost 500 SMEs (Clifton Asset Management survey - the survey was carried out in May 2012 involving UK-based SMEs) found that an astonishing 84 per cent valued their IP at zero! Many also do not realise that IP is not just their logo but their customer lists, their website and the designs of the products they sell.

More to do

The Banking on IP? report recognises that more must be done to help the UK’s businesses identify their IP and use it to stimulate business growth. The report has identified the alternative finance market as the best way to do this.

Last year we added a free online IP assessment tool to our pensionledfunding.com website to help business owners asses whether they hold IP and what its value might be. In four simple stages businesses can get an approximate IP value – though clearly if they wish to use an IP asset for funding, a more thorough process has to be undertaken.

Pension-led funding has already used IP assets to help hundreds of businesses secure investment. The Clifton Asset Management group of companies has advised on pension-led funding in more than 2,500 cases, many of them repeat deals, around 80% of which involved the utilisation of independently valued intellectual property, helping SMEs to the tune of around £166m in funding.

The financial instruments most frequently used by this form of alternative funding are a sale and leaseback mechanism. This is where one or more assets are acquired by the pension fund and leased back to the business in exchange for a stream of payments back into the pension over an agreed fixed term. Alternatively, in the case of a SSAS, the pension fund will provide a loan to the business which uses the IP as security. This process complies with FCA guidelines and is accepted by HMRC.

As well as helping inject fresh capital into the business, the IP is now held within a creditor-protected pension environment. Further benefits include the fact that any appreciation in the value of IP, or income derived via lease/licence agreements, is free from direct taxation when held in the pension wrapper.

Mind the gap

Using IP as an asset with which to secure funds can be transformational for a business. But, despite the efforts of various government and independent reports to inform businesses about the value of IP, there is a definite IP knowledge gap that still needs to be bridged.

The way companies do business has changed and knowing exactly what they are worth and how they can use their assets to benefit themselves is a powerful tool. With further government support more business owners should start to realise the potential they hold within their businesses – and that can only be a good thing for the economy, especially if the value of British brands continues to rise.

2. Trade marks in sport

Readers of IP Insight will already know that a strong brand, and trade mark protection, create business value. Indeed, intellectual property can become a company’s most valuable asset.

Branding in sport is big business. Branding issues affect the titles of sporting events, the names of participating teams, the venues where the events take place, as well as the players themselves. Branding considerations are also key to event sponsors.

This month sees The Championships at Wimbledon take place, and Sharon Daboul from EIP explores two trade mark issues that affect the oldest tennis tournament in the world, and one of the most important events in the sporting calendar.

Recap on trade marks

A quick recap on trade marks. Trade marks are signs that enable consumers to distinguish between one supplier and their competitors. Trade marks build trust, loyalty and confidence in the goods and services on which they are used. Trade marks can also generate goodwill, and products displaying trade marks can command premium prices.

Trade marks can include words, logos, colours, shapes, sounds, smells, and holograms.

Registering a UK trade mark gives the owner the exclusive right to use their mark in the UK and makes it easier and cheaper to stop third parties who adopt the mark, or a similar mark, without permission. UK trade marks are registered at the Intellectual Property Office.

Trade marks registered by The All England Lawn Tennis Club

Wimbledon is a suburb in south-west London, yet it is also a registered trade mark of The All England Lawn Tennis Club in the European Union.

How is it possible to register a place name as a trade mark?

A trade mark, to be registrable, must be distinctive and capable of distinguishing the goods and services of one business from those of other providers. Trade marks can be refused if they consist exclusively of signs that designate the place of production of the goods for which protection is intended or the place where the relevant services are provided. WIMBLEDON has been found to be registrable in the EU on the basis that it is not a pure indication of geographic origin for goods and services related to the well-known tennis competition, and it is unlikely that consumers will see products labelled WIMBLEDON as anything other than a trade mark. That has not stopped some of the marks from being challenged, however.

The All England Lawn Tennis Club would also have the right to exploit the name WIMBLEDON by virtue of their use going back over 100 years and the reputation they have built up in the mark, although this would be much more complicated than relying on their registered trade marks.

The term WIMBLEDON is not just registered for sporting events. As Wimbledon is necessarily associated with the manufacture of lots of products, it is registered for a wide array of goods and services. 18 categories of goods and services are protected across the European Union, including:

• food
• flowers
• cosmetics
• garden furniture
• bed linen
• spectacles
• umbrellas

The All England Lawn Tennis Club have around 40 trade marks that cover the UK, including their famous logo for ‘THE CHAMPIONSHIPS, WIMBLEDON’ and the purple/green colour combination.

These trade mark registrations show how important merchandising is to the Club. The registrations allow the Club to generate funds by licensing their intellectual property to a wide variety of product manufacturers. According to their website, the All England Club’s licensing programme incorporates 30 licensed companies, all of whom are entitled to display the WIMBLEDON brand.

Careful merchandising also helps The Club to build up a certain association with the brand. The Championships at Wimbledon are associated with heritage and prestige, and there is no doubt that careful exploitation of their trade marks has contributed to this.

Sports personalities

Players are brands in themselves and trade mark registrations can enable players to capitalise on their fame, provided the name can function as a designation of trade origin. On the flipside, if a name is not protected, it can be hard to prevent others from selling unlicensed merchandise.

Following his success at Wimbledon in 2013, Andy Murray registered his name as a trade mark in the EU. He included over 100 different items in six classes, to cover a variety of possible merchandising routes. His registered trade mark will enable him to build up a powerful personal brand, and will make it easier to prevent third parties from using his name on their products, without permission. A trade mark registration will also help Andy Murray to protect his existing sponsors.

The more successful a player, the more valuable a brand. Prior to making his own applications, but following Andy Murray’s Wimbledon victory, there had been attempts by unconnected parties to register ‘Andy Murray’, ‘Andy Murray Wimbledon Winner’ and ‘Andy Murray Tennis Champion’ as UK trade marks. The UK IPO lists these marks as refused but they serve as a warning that if you do not protect your trade marks, someone else will.

As well as their names, sports personalities can, and have registered other insignia for which they are known, including nicknames, poses, slogans and signatures.

Prior to Andy Murray, Fred Perry was the last British player to win the men’s Championship at Wimbledon. Many now associate his name with sportswear and British street fashion, over his tennis career, and this is something Fred Perry even acknowledged during his lifetime. The Fred Perry laurel wreath logo has been registered for clothing since 1955, and Fred Perry’s signature has been protected in the UK as a trade mark, since 1965. The brand has spread to 50 countries around the world and remains highly popular.

The importance of trade mark protection cannot be underestimated and when trade marks are exploited properly, they can become a highly important asset, and for individuals, their lasting legacy.

Sharon Daboul is a trade mark attorney at EIP.

3. Saucy secrets

A sure fire way to gauge the success of a brand is to look at how long it’s been around – the longer it lasts in today’s throw-away society, the more it must be embedded into our lives, our subconscious and our culture.

One brand that surely has stood the test of time and lives on as one of the great British institutions is Lea & Perrins.

The famous Lea & Perrins Worcestershire Sauce was created in the 1830s by two chemists (coincidentally named John Wheeley Lea and William Henry Perrins). When the sauce was first made, the duo didn’t like the taste and simply cast it aside as a failed attempt. It was only months later when the discarded barrels were rediscovered that they realised the taste had mellowed and transformed the ingredients in the recipe into what we now recognise.

To this very day, the sauce is still left to mature for 18 months prior to being blended and bottled, to create that unique flavour. In 2005, the brand became part of the Heinz family, owned by H.J. Heinz Foods UK Limited, and sits proudly alongside its many signature brands, including Heinz Tomato Ketchup and Heinz Beanz.

Only a handful of people know the exact recipe used to make Lea & Perrins – it is kept firmly under lock and key by Heinz as a trade secret. Trade secrets can be a notoriously difficult area of IP to manage but, if done successfully, can offer huge benefits and rewards for a business.

Nigel Dickie, Director of Corporate and Government Affairs at Heinz Europe sees this trade secret as a vital part of the company’s IP portfolio. He explains:

It’s a difficult area as it relies on people’s ability to keep information confidential

You need to have sufficient operational procedures and contractual safeguards in place to ensure the secret is only disclosed to those who have a real ‘need to know’ and it isn’t inadvertently disclosed to others.

This, says Nigel, is the both main benefit and downfall of trade secrets.

One of the benefits is that you don’t have to disclose information and another is that you have perpetual protection. However, once a trade secret is in the public domain, it can’t be made secret again so its value is effectively lost.

As a worldwide business, Heinz owns a vast array of IP rights, and not just for Lea & Perrins. But perhaps the most important of all of these are the trade marks they own, which form the very essence of the well-loved brands we see on our supermarket shelves.

Developing a good brand takes time and resource, and so it’s important to protect this investment

says Nigel.

A company’s brand can be a very valuable asset as it brings in custom and generates revenue. Consumers recognise the name of products as well as logos such as Lea & Perrins, and often choose brands they recognise.

For SMEs, it can be the fine line between making the business thrive or strive to keep afloat. Even for a large company like Heinz, IP protection is vital to ensure its future success. So how do they go about this?

We only apply for the relevant and necessary IP rights

..Nigel points out.

Our IP strategy for each product is different, depending on what the product is, our marketing campaign and our business strategy.

We have a specialised IP team who look at business plans and decide what IP needs to be protected. They will then consult with an IP professional – a trade mark or patent attorney – and use an external professional agent to submit all IP applications.

There are many businesses out there who would love to be able to replicate the success of Lea & Perrins, what advice would Nigel give to those aspiring to follow in their footsteps?

Take legal advice at an early stage

IP is a complex are of law and in some cases unknowingly disclosing information or delaying registration could mean that certain types of protection will not be available to you.

Keep anything such as trade secrets or products or processes that could be protected by patents confidential until you have obtained legal advice and ensure third parties developing materials for you give you the necessary rights to use the materials they produce.

4. IPR protection in China for the Textile Industry - part 2

China’s textile industry is both an opportunity and threat to foreign businesses. It is a major market for those supplying production technologies and a key supply base for textiles and finished goods. However, foreign technologies and brands that are not adequately protected often fall victim to infringement by Chinese competitors.

This article is a continuation from last month to further address IP issues across subsectors of the textile industry, including textile machinery, yarns and specialty fabrics, finished fabrics and brand apparel and accessories. The areas of IP most relevant to the above sectors are discussed over two parts, with this second part addressing copyrights, transfer of technology and trade secrets. For more information on trade marks and patents, please refer to last month’s article.

Copyrights

Copyrights are granted automatically, however China does allow voluntary registration. A Copyright registration will be accepted as evidence of copyright ownership in the event that you wish to enforce your copyright against an infringer and greatly reduces the preparation of evidence.

Administrative enforcement of copyright is possible through the National Copyright Administration, although the local administrative authorities tend to focus on enforcement of pirated software and media products. Where the infringement is not literal (ie not an exact copy), it is more suitable to bring cases to the People’s Court.

If the copyright is not registered, it is important to keep dated records of the first creation of the work so that the date of creation and ownership of the copyright can be proven.

A critical component in textile manufacturing technology may be operating software and technical manuals to operate and/or maintain machinery. Such materials are automatically protected in China as works of copyright. However, it is recommended that companies register the copyright to prove ownership in case of infringement.

In some cases where machinery has been copied by a competitor through reverse engineering and it is not protected by invention, utility or design patents, the only recourse that the original manufacturer may have is to claim copyright infringement of software or operating manuals. This only addresses the copying of the software and manuals but does not protect the design of the machinery itself.

Apparel designs may also be protected as works of copyright. Copyright protection is granted automatically on creation of a work, allowing a design to enjoy double protection through a design patent and copyright.

Having a registered copyright in China is a convenient way to show evidence of ownership. You can also record a series of works under one copyright application, for example, all the same designs in one season.

However, it should be noted that copyright can be more complicated to enforce compared to a design patent. Therefore, the fact that no registration process is required to enjoy copyright protection should be balanced against a greater cost of actually enforcing the right if infringed, compared to a design patent.

Apart from the protection of their designs, apparel companies can also use copyright to protect their catalogues, brochures and websites.

Transfer of technology

When manufacturing in China, either directly or through a third party (supplier, joint-venture partner), companies will often import their technology from Europe and appoint agents or distributors who assemble, install and service the equipment.

In order to avoid loss of important assets or even loss of markets, know-how transfers and technology transfers should be accompanied by contracts with licensees, suppliers, employees, sub-contractors, etc., covering the scope of each party’s rights and obligations, as well as the geographic restraints, time scopes, confidentiality and non-competition issues. However, technology transfer contracts are subject to rules to prevent restrictive and uncompetitive practices. Companies licensing technologies to Chinese entities in the form of technical solutions or services should comply with China’s technology transfer regulations.

Trade secrets

In some cases, products or processes are protected as trade secrets instead of patents. Some companies may even prefer to protect their product or their processes as trade secrets (or a combination of patents and trade secrets). Trade secret protection is particularly common for processes, making it difficult or impossible for a competitor to discover the process through reverse engineering.

China defines a trade secret as valuable information that is not publicly known, and the owner has taken steps to keep it secret. The owner of the secret must take his/her own measures to keep the information secret. Trade secrets are only violated when another party has taken information that was explicitly kept confidential.

It is important to note that reverse engineering (ie disassembling a machine or product to learn how it is made) is a common practice in China. Only a product or process granted with a patent may be protected from reverse engineering. Should a competitor discover the secret information through his/her own reverse engineering efforts, it is not considered an act of infringement.

Trade secrets are often lost by owners failing to isolate the secret information. In many cases, it is the owner’s employees who pass the information to others. Therefore, companies with trade secrets should pay particular attention to protecting trade secrets within the organisation and ensure that there is a clear process in place. In the event that information is leaked, having records of the measures taken in order to protect the trade secret is important in providing concrete evidence that the information was intended to be confidential. Therefore, in order to preserve a trade secret, the owner should identify exactly what information constitutes the ‘secret’ and take steps to isolate it. Within the organisation, there may be physical barriers such as passwords or contractual barriers such as strict confidentiality clauses in contracts for employees or any licensees who have access to the secret.

It is also essential to require any potential partner in China to sign a non-disclosure agreement (NDA) before revealing any commercial or technical information. Although NDAs are recognised by China’s courts, its most valuable function is often to signal to your potential partner that you are serious about protecting your IPR. China’s Labour Contract Law allows restriction for departing employees in key positions to work for a competitor for up to one year, although reasonable remuneration should be provided.

In case of unauthorised disclosure or unauthorised use of information regarded as trade secret, both administrative action through the Administration of Industry and Commerce (AIC) and judicial enforcement through the People’s Courts are available. However, given the complexity of trade secret infringement cases and the high value of the information, cases are normally handled by the People’s Courts. There are also criminal sanctions for trade secret infringement if the monetary value of the theft is particularly high.

Case study about finished fabrics

A European company R had developed a type of accessory that greatly improved the appearance of finished apparel. Company R had earned a leading position to the extent that apparel buyers often demanded this product be used in the apparel they sourced. The product was covered by a patent in some countries but protected only by a trademark registration in China. Company R’s trademark was used as a hang tag on the finished garment to indicate that their product was used in the garment.

Since the original product was essential for many apparel suppliers in China, local competitors began to offer a competing product. Company R did not have any legal rights to prevent competitors copying the product itself, but it was able to take action against accessory suppliers and apparel manufacturers who used the original brand tag on their apparel without actually buying company R’s product. Company R took administrative action for trademark infringement through the AIC and also publicised the actions in industry press, which appeared to have an effect.

However, a local competitor registered the Chinese nickname of company R’s product as a trademark, allowing the competitor to use company R’s name legally. Company R was then forced to pursue cancellation of the trademark through the Chinese Trademark Office procedure, which is a lengthy and uncertain process.

Company R could have further protected its IP by registering not only its official name, but also its translated Chinese name and any other nicknames that the product was referred to as in the China market. The process and cost of registering multiple trademarks are generally more manageable than cancelling, opposing or buying back a trademark.

The China IPR SME Helpdesk is a European Commission funded project that provides free, practical, business advice relating to China IPR to European SMEs. To learn about any aspect of intellectual property rights in China, visit our 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.

5. Growth cell

Great science, but little IP? Britain has been here before. While monoclonal antibodies were discovered in the UK in the 1970s, much of the commercialisation of this technology has taken place in the US meaning that only a small proportion of the financial reward found its way back here.

We are now at a similarly inspirational moment in cell therapy, which holds out the prospect of a radically new series of innovative medicines. It’s becoming more feasible that in the future, when you are sick, your cells could be removed and adapted, then put back in to fix you. As well as this targeted therapy approach, there will also be cell therapies suitable for use in everyone.

Our organs might be regenerating by then as well.

Ten years ago, you could only speculate about the chances of re-growing your liver

comments Michael Bennett, the IP and contracts manager at the Cell Therapy Catapult.

Today, the global cell therapy community is working on the kinds of tools and techniques needed to make these kind of approaches a reality. All kinds of areas of medicine could be equally transformed.

The question is how to make sure the health and economic benefits that result from the UK’s cell therapy expertise ‘stick’ here? Across Britain, it appears that the number of early-stage trials on potential therapies is increasing healthily, mainly within universities. Yet, under old models of innovation, few of these candidates are likely to complete the transfer from science into the market, with many technical barriers to be overcome, and venture capitalists holding back from what is seen as a risky industry.

Two years ago, the Cell Therapy Catapult was created to bridge this translational gap, or valley of death. Essentially, its focus is on the acceleration of promising therapies into the clinic and towards the market, mapping out how they can be produced on a large scale, as well as helping cell therapy developers navigate their way through business, clinical and regulatory hurdles. By derisking projects in this way it can fulfil its mission - that of helping build a thriving cell therapy industry in the UK.

In commercialising this science, patents often represent the strongest form of exclusivity (although know-how is clearly important as well). In a relatively new industry like cell therapy, as an inventor, you have the potential to break new ground and make a broad claim to IP, as many organisations are now doing. However, you may be open to the challenge that you are not making any modifications to the underlying biology.

You therefore are likely to face a choice in filing a patent. Do you focus on your specific discovery? or do you make a wider claim to capture any other applications that might be found later?

Some are tempted to file too many patents and lose the focus on their core technology, says Michael Bennett. The route he favours, at least for the time being, is to keep a broader set of options open by filing at the UK IPO, then extending any rights through a series of national patents in the EU and the US. By pursuing a divisional strategy, you give yourself the chance of securing your core technology first, then following up any additional uses.

Once filed, a patent will be entering a competitive landscape in which it will be subject to numerous challenges from those who may already have secured a broad claim. To strengthen the chances of their cell therapies gaining investment and reaching the market, the Cell Therapy Catapult works with cell therapy academic and other developers to strengthen and make the most of their IP. For example, Michael Bennett and his colleagues can bring parties together to collaborate, building stronger projects with a better chance of reaching the market. Financially, it adds up too, as it can often help leverage grant funding.

In facilitating these types of collaboration, the Cell Therapy Catapult ensures discussions around the detail of who owns any foreground IP and how to access any background IP take place within a realistic framework, making sure all parties have access to what they need at the end of the project. For the developer, this may be rights to the specific IP needed to develop and commercialise its therapy globally. In turn, the Cell Therapy Catapult is likely to focus on using IP to develop initiatives of benefit to the UK industry as a whole. (The IPO’s model agreements for joint research can also be a good starting point).

In a recent move to simplify and expedite the development of an innovative cancer therapy, the Cell Therapy Catapult has formed a joint venture (JV) with the two pertinent university technology transfer organisations. The TTOs have contributed their relevant patents and know-how to the JV, which is responsible for the further development of the therapy, and they will be eligible for late-stage development milestones and royalties as it progresses. The Cell Therapy Catapult expects to use this transaction as a template for the development of some projects in the future. In addition, as it settles into its new set of labs at Guy’s Hospital by London Bridge, it is starting to generate its own IP, some of which it will release, some of which it will license, all of which it will use to support the growth of cell therapy.

Other than facilitating the speed at which the IP in any ventures can be built, the CTC is exploring further forms of protection. For example, helping cell therapy developers gain a layer of protection that can last ten years, perhaps longer with ‘supplementary protection certificates’.

So where is the Cell Therapy Catapult aiming to be in five years? The hope, says Michael Bennett, is that:

we will have helped a number of technologies move closer to the market and we will be starting to use cell therapies to heal patients.

Further details are available on the Catapult website.

6. IP in the news

Stories hitting the headlines this month:

• Express: Is this what the iWatch is going to look like? Let’s hope so
• Telegraph: Ten most valuable albums of all time
• BBC: Call for Google Glass ban in UK cinemas
• Express: Peter Fonda dismisses T-shirt suit
• Mail: The genius, aged 12, whose invention could stop babies from dying in hot cars by stopping forgetful parents leaving them behind
• BBC: Five arrests over ‘hoax’ UK government websites
• Independent: Alan Bond: The British engineer says he will revolutionise space travel – and he’s building the rocket to do it
• Telegraph: ‘My first idea gave me a wedgie!’ Meet the 11-year-old inventor of the kid’s bike harness
• BBC: Africa’s mobile boom powers innovation economy
• Mail: Tyler Perry wins the right to use ‘What Would Jesus Do?’ for film title after six-year court battle
• Telegraph: Scientific breakthroughs: look how far we’ve come
• Mail: Katy Perry ‘sued for ripping off 2008 Christian rap song’ for her 2013 mega-hit Dark Horse
• Telegraph: Thank you for the music: A potted pictorial history of portable music devices
• Guardian: From Google to Amazon: EU goes to war against power of US digital giants

And finally…

• Mail: Robo Flop!: Think a £1,300 robotic mower would take the stress out of summer? So did QUENTIN LETTS - until his drone drove him mad

7. Your questions answered

Do I need to inform the IPO if I have allowed someone to use my design?

Yes, you can give someone else permission to use your registered design by granting them a licence. The terms of any licence are entirely a matter between you and the licensee, and we do not have any powers to investigate the validity of a licence.

You or the licensee should register the licence, or cancellation of a licence, with us and we will record it in the register of designs. To register a licence or cancellation of a licence you need to fill in form DF12A. There is no charge for this.

Should I use an unofficial copyright register?

There is no official copyright register because copyright is automatic. There are certain steps you can take to protect your rights, but you do not have to register anywhere.

There are, however, a number of companies that offer unofficial copyright registers. You should think very carefully whether this is a useful service for you before choosing this route. Some of the things to think about are:

• how much does it cost and is it a one-off or regular payment?
• are you paying just for a registration, or does the cost cover more than this, for example help with a legal action should your copyright be infringed?
• is the registration likely to be better than the evidence you can create for yourself by sending a copy of the work to yourself by Special Delivery post and not opening the envelope upon its return?
• are you likely to have a problem proving that you had the copyright material at a certain time which is all that registration can help prove?

Note that neither registration nor sending a copy of the work to yourself show that you were the creator of the work. Keeping copies of all your drafts and any other material that shows your connection with the particular copyright material as you develop it could, however, be useful evidence if you ever have to prove that you are the author.