Tactics to Protect Intellectual Property ("IP")

The UK Government has stated that businesses are risking IP potentially worth billions of pounds because they are not aware that it exists and/ or do not take advantage of the protective measures that are available.

Nearly all businesses use and rely on IP, either using third party IP, developing their own or both. Businesses generate their own IP, such as customer lists, websites, marketing databases, products, product names, business methods, business names, brochures, contracts, internal documents and software to name a few. And businesses use third party IP such as telecommunications networks, IT Systems, software, outsourced branding marketing or development work, websites, robots, machines, books and directories.

Identify and Exploit IP

As mentioned above, IP covers a variety of ideas, products and business information. One item may generate any number of IP rights. For example consider two corporate websites, one developed by an outside developer and the other by a customer in house (the following principles would equally apply to software, documents and other material):

If details of a new website were disclosed to a website developer in the early stages of a development project, the customer should exercise its legal right to require the developer to keep the details confidential. This will require the customer to observe certain principles such as disclosing the details pursuant to written confidentiality terms.

A website development project will inevitably generate IP belonging to the customer, such as product information, names and logos and text as well as IP developed by the developer, such as underlying software and other digital, audio and visual content comprised in the website. It is essential for the customer to secure a written assignment or licence of the IP, otherwise the developer will own the IP and the business will have no express right to use the website or maintain and develop it independently in future. If the developer will not assign its IP to the customer, the customer must be sure that it obtains the licence required to deliver the benefits intended from the project now and in future. The customer should consider placing in escrow any elements of the IP that it would require to operate the website independently of the developer in certain circumstances, say if the developer went out of business. Domain names may be registered in respect of the website. The website operator may generate databases of website visitors and website customers which may be protected by the relatively new IP right, the database right.

Using the above example, if the material (be it software, a document, a website, a database etc.) was developed by the customer in house then the customer will own the IP. This gives the customer control over the material and the customer will have the exclusive right to use and exploit the material and to prevent third parties from doing the same. If the customer has used any third party contractors during the project then it should be sure to obtain an assignment of licence of any work done.

Protect IP

Registered IP - Registered IP by definition requires registration with the appropriate government office (which will be determined by the jurisdiction in which protection is required). Each application will be subject to certain legal requirements depending upon the nature of the application. If there any third parties with identical, or in some cases similar, registered IP then a business will not be able to register and the other third party will have the monopoly right to use the IP. The benefit of registering (e.g. a trademark) is that, if a competing business uses the same or a similar name in relation to their business, you have the right to take action for infringement and stop them from using your registered trademark.

Unregistered IP - No formal registration is required to obtain protection. For example, providing certain requirements are satisfied, database right and copyright protection are automatic. Steps can be taken to show to the world at large that a work is copyright by marking the work with the international copyright symbol © followed by the name of the copyright owner and the year of publication. In order to protect trade secrets it is important to ensure that any recipients of confidential information, be it employees, potential business partners or suppliers, are advised that the information is confidential and that they are bound to conditions of confidentiality. Prudent businesses will ensure that any agreement is evidenced in writing to avoid any disputes as to the agreed terms. If adequate terms are not in place, there is a risk that you would not be able to prevent third parties exploiting your information and ideas.

Risks – Real Life Example

It is vital that businesses invest in the resources required to identify and protect IP to ensure, not only, that IP can be used and exploited without undue restriction but also to stop third parties from encroaching upon, or reaping the benefits of ideas and information.

In the 2003 High Court case of Cray Valley v Deltech, Borden Limited operated a resin manufacturing business. Cray Valley bought the business from Borden, but Cray Valley did not buy the factory or the equipment in the factory. Borden then sold the factory and the equipment to Deltech which took on Borden's former employees. None of the former employees had restrictive covenants or express confidentiality provisions in their contracts of employments. None of the documents that contained the resin recipe were marked as confidential. Cray Valley took action against Deltech on the basis that the resin formulations were confidential information that Cray Valley owned (Cray Valley wanted to stop Deltech's employees from making resins that they made whilst employed by Borden). Cray Valley failed in its action as it could not show that the information was confidential and disclosed under obligations of confidentiality. Therefore Cray Valley could not stop Deltech from exploiting the resins and the value of Cray Valley's business reduced significantly.

Action List

The Cray Valley case is just one example of the impact of not protecting IP. IP is a valuable business asset and should be registered and protected such that it can be commercially exploited without undue restriction. The Government advises, on its IP website, that:

"understanding IP can be very time-consuming. If you are unable to have dedicated people within your organisation who understand IP and the law, it may be best to seek advice from a solicitor or other professional in this area".

We will be releasing a series of articles in the forthcoming months relating to IP issues arising out of IT projects. In the meantime, if you require any advice or further information on identifying, protecting, exploiting or enforcing IP rights, please contact Tim Cook.

Tim is a member of Taylor Walton's Company Commercial department and qualified as a solicitor in London in 1999. Tim joined Taylor Walton in December 2000. His key areas of expertise are Intellectual Property, Technology Law and Data Protection.

Source: IT Director