INTELLECTUAL PROPERTY

Intellectual property (IP) is a term referring to creations of the intellect for which a monopoly
is assigned to designated owners by law. Some common types of intellectual property rights
(IPR) are copyright, patents, and industrial design rights; and the rights that protect trademarks,
trade dress, and in some jurisdictions trade secrets: all these cover music, literature, and other
artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Intellectual
property rights are themselves a form of property, called intangible property.
A patent represents a legal right obtained by an inventor providing for exclusive control over the
production and sale of his mechanical or scientific invention... [demonstrating] the evolution of
patents from royal prerogative to common-law doctrine."
"All new discoveries are the property of the author; to assure the inventor the property and
temporary enjoyment of his discovery, there shall be delivered to him a patent for five, ten or
fifteen years."
Until recently, the purpose of intellectual property law was to give as little protection possible in
order to encourage innovation. Historically, therefore, they were granted only when they were
necessary to encourage invention, limited in time and scope.

Main types of intellectual property:

1. Patents – 20 year monopoly (annual fees & patent agents)
2. Copyright – whole life + 70 years after author’s death
3. Registered designs – up to 15 years
4. Registered trademarks – period of 10 years, but can be filed endlessly – it is an item of
personal property

Patents
A patent is a form of right granted by the government to an inventor, giving the owner the right
to exclude others from making, using, selling, offering to sell, and importing an invention for a
limited period of time, in exchange for the public disclosure of the invention. An invention is a
solution to a specific technological problem, which may be a product or a process.
A patent is a 20-year monopoly right granted by the state to an inventor. It is a reward for
invention, designed to provide the patent-holder with an exclusive right to benefit from it, but for
a limited period of time. The function of patents is to stimulate and encourage innovation. Before
a patent is granted, an inventor has to show that the invention is new. In practice this means that
a patent must be a novelty, an inventive step and have an industrial application. If a direct
infringement of a patent occurs, the inventor has to take legal action to the courts in order to
secure a remedy. These remedies can be:
- Injunction: The defendant is restrained from carrying out activities that infringe the
patent;
 - Compensation for the suffered loss as a consequence of the infringement, or an account
of profit where instead of damages the award is based on the profits actually made and
attributable to the infringement;
- An order that the infringing articles be destroyed or delivered up;
- A declaration that the patent is valid and has indeed been infringed by the defendant.

Patents have to meet the criteria of:

 Novelty
 Inventive step – non-obviousness
 Industrial application

Patent deter innovation by:

 Denying follow-on innovators access to necessary technology (EULA)
 Increasing entry barriers
 The expense required to avoid patent infringement
 The issuance of questionable patents

Benefits of patents:
1. Freedom to operate
2. Provides a strong negotiation position
3. Used as an indicator of value to an external party
4. Prevent copying,
5. Patent blocking,
6. Prevents lawsuits,
7. Enhance reputation,
8. Licensing revenue,
9. Measure performance

A patent is an exclusive right granted for an invention, which is a product or a process that
provides, in general, a new way of doing something, or offers a new technical solution to a
problem. To get a patent, technical information about the invention must be disclosed to the
public in a patent application.
In principle, the patent owner has the exclusive right to prevent or stop others from commercially
exploiting the patented invention. In other words, patent protection means that the invention
cannot be commercially made, used, distributed, imported or sold by others without the patent
owner's consent.
Patents are territorial rights. In general, the exclusive rights are only applicable in the country or
region in which a patent has been filed and granted, in accordance with the law of that country or
region.

Registered designs
An industrial design right protects the visual design of objects that are not purely utilitarian. An
industrial design consists of the creation of a shape, configuration or composition of pattern or
color, or combination of pattern and color in three-dimensional form containing aesthetic value.
An industrial design can be a two- or three-dimensional pattern used to produce a product,
industrial commodity or handicraft.

There are two forms of protection available for designs:

- Registered designs: To provide protection for the look or appearance of products. It tends to
apply particularly to aspects of products, such as shapes or surface patterns. In a legal sense, an
industrial design constitutes the ornamental aspect of an article.
An industrial design may consist of three dimensional features, such as the shape of an article, or
two dimensional features, such as patterns, lines or color.
In principle, the owner of a registered industrial design or of a design patent has the right to
prevent third parties from making, selling or importing articles bearing or embodying a design
which is a copy, or substantially a copy, of the protected design, when such acts are undertaken
for commercial purposes.
Industrial designs are applied to a wide variety of products of industry and handicraft items: from
packages and containers to furnishing and household goods, from lighting equipment to jewelry,
and from electronic devices to textiles. Industrial designs may also be relevant to graphic
symbols, graphical user interfaces (GUI), and logos.
In most countries, an industrial design needs to be registered in order to be protected under
industrial design law as a “registered design”. In some countries, industrial designs are protected
under patent law as “design patents ”.
Industrial design laws in some countries grant – without registration – time- and scope limited
protection to so-called “unregistered industrial designs”.
Depending on the particular national law and the kind of design, industrial designs may also be
protected as works of art under copyright law.

- Design rights: This covers designs that are more functional than registered designs.

Trademark
A trademark is a recognizable sign, design or expression which distinguishes products or
services of a particular trader from the similar products or services of other traders.
A trademark is a sign used to distinguish the goods or services of one trader from those of
another. Typically the term covers words, logos and pictures, although these days it has been
extended to include other forms used to identify particular goods or services. Trademark = any
sign capable of being represented graphically which is capable of distinguishing goods or
services of one undertaking from those of other undertakings
Requirements trademark:
 Should satisfy the requirements of section
 Distinctive
 Non-deceptive  Orwoola
 Not confusing
 must not sound like other trademarks

A trademark is a sign capable of distinguishing the goods or services of one enterprise from
those of other enterprises. Trademarks are protected by intellectual property rights.
At the national/regional level, trademark protection can be obtained through registration, by
filing an application for registration with the national/regional trademark office and paying the
required fees. At the international level, you have two options: either you can file a trademark
application with the trademark office of each country in which you are seeking protection, or you
can use WIPO’s Madrid System.
In principle, a trademark registration will confer an exclusive right to the use of the registered
trademark. This implies that the trademark can be exclusively used by its owner, or licensed to
another party for use in return for payment. Registration provides legal certainty and reinforces
the position of the right holder, for example, in case of litigation.
The term of trademark registration can vary, but is usually ten years. It can be renewed
indefinitely on payment of additional fees. Trademark rights are private rights and protection is
enforced through court orders.
A word or a combination of words, letters, and numerals can perfectly constitute a trademark.
But trademarks may also consist of drawings, symbols, three-dimensional features such as the
shape and packaging of goods, non-visible signs such as sounds or fragrances, or color shades
used as distinguishing features – the possibilities are almost limitless.

Copyright
A copyright gives the creator of an original work exclusive rights to it, usually for a limited time.
Copyright may apply to a wide range of creative, intellectual, or artistic forms, or "works".
Copyright does not cover ideas and information themselves, only the form or manner in which
they are expressed.
Copyright is an intangible right that comes into effect through creative effort, giving rise to a
wide range of creative works including literary, artistic and musical works. Copyright is
automatic and comes into existence upon creation of the work. The exclusive right conferred by
copyright extends to a wide range of activities that includes: copying or reproducing; adapting;
distributing; issuing and renting; public performance; broadcasting.

Requirements copyright:
 It must be in a tangible form so that it can be communicated or reproduced
 It must be the author’s own work and thus the product of his skill or judgment

Copyright (or author’s right) is a legal term used to describe the rights that creators have over
their literary and artistic works. Works covered by copyright range from books, music, paintings,
sculpture, and films, to computer programs, databases, advertisements, maps, and technical
drawings.

Trade secrets
A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of
information which is not generally known or reasonably ascertainable, by which a business can
obtain an economic advantage over competitors or customers.

Trade secrets are confidential information that comprises the specialist ‘know-how’ that enables
a business to manufacture products or services successfully.
Trade secrets are intellectual property (IP) rights on confidential information which may be sold
or licensed.
In general, to qualify as a trade secret, the information must be:
 commercially valuable because it is secret,
 be known only to a limited group of persons, and
 Be subject to reasonable steps taken by the rightful holder of the information to keep it
secret, including the use of confidentiality agreements for business partners and employees.
The unauthorized acquisition, use or disclosure of such secret information in a manner contrary
to honest commercial practices by others is regarded as an unfair practice and a violation of the
trade secret protection.
In general, any confidential business information which provides an enterprise a competitive
edge and is unknown to others may be protected as a trade secret. Trade secrets encompass
both technical information, such as information concerning manufacturing processes,
pharmaceutical test data, designs and drawings of computer programs, and commercial
information, such as distribution methods, list of suppliers and clients, and advertising
strategies.
A trade secret may be also made up of a combination of elements, each of which by itself is in
the public domain, but where the combination, which is kept secret, provides a competitive
advantage.
Other examples of information that may be protected by trade secrets include financial
information, formulas and recipes and source codes.
Depending on the legal system, the legal protection of trade secrets forms part of the general
concept of protection against unfair competition or is based on specific provisions or case law
on the protection of confidential information.
While a final determination of whether trade secret protection is violated or not depends on the
circumstances of each individual case, in general, unfair practices in respect of secret
information include industrial or commercial espionage, breach of contract and breach of
confidence.
A trade secret owner, however, cannot stop others from using the same technical or commercial
information, if they acquired or developed such information independently by themselves
through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are
not made public, unlike patents, they do not provide “defensive” protection, as being prior art.
For example, if a specific process of producing Compound X has been protected by a trade
secret, someone else can obtain a patent or a utility model on the same invention, if the inventor
arrived at that invention independently.

Passing-off is effectively a common-law version of trademark registration. It is based on the

principle that a trader must not sell goods under the pretense that they are the goods of another.

One of the key features of intellectual property rights (IPR) is that they provide scope for
licensing, that is to say where the IPR associated with an invention has been legally established
through a patent, the holder can then permit someone else to produce the invention in return for a
fee (‘licensing agreement’).

Benefits of Licensing Intellectual Property Rights.

 Reduce or eliminate production and distribution costs and risks.
 Reach a larger market.
 Exploit in other applications.
 Establish standards.
 Gain access to complementary technology.
 Block competing developments.
 Convert competitor into defender.

COLLABORATIONS
Collaboration involves agencies coming together and fundamentally changing their individual
approaches to a goal to allow for the sharing of resources and responsibilities.

WHY COLLABORATE?
If you are faced with a problem that you cannot solve yourself – technical, financial, or
commercial problem:
a) To share risks
b) To share costs
c) To gain technological know how
d) To speed up product development
e) To develop industry standards
f) To gain additional markets
g) Reduce time-to-market

BARRIERS TO TRANSFER
What hinders technology transfer and what cause joint projects to fail?
a) Lack of awareness – what technologies are available to them
b) Lack of knowledge – If staff of company is lacking technical knowledge, it may not be able
to capitalize on the technology being offered in the transfer
c) Lack of funds – company may not be able to afford the development costs of the technology
being transferred
d) Lack of common interests – Individuals putting the interests of their own company ahead of
the alliance
e) Conflict of interest – Even in collaborations on the technical level or strong, it has been
found that collaborations between competing companies doesn’t work.
f) Lack of Trust – If little trust exists between companies, it is doomed to fail
g) Poor communications – Fail to keep each abreast on everything relevant to the collaboration,
activities, thoughts, processes, goals, direction of venture
h) Lack of infrastructure – company may lack equipment and facility in infrastructure to take on
the transfer
i) Over-committed – The Company may be over-committed on current projects and simply
lacks the time needed for success.

BARRIERS – WITH REGARD TO COLLABORATION

a) Technical Problems – which are generally overcome, but which add time and money and
frustration
b) Resource Limitation – Poor budget control
c) Change in Project’s Structure – Loss of key members or loss of partner
d) Organizational Problems – due to a partner losing or changing interest in the technological
side.

FACTORS INFLUENCING SATISFACTION OF FIRMS AND RESEARCH

ORGANIZATIONS IN COLLABORATION
 Previous links
 Commitment
 Partner’s reputation
 Definition of objectives
 Communication
 Conflict
 Organizational design
 Geographical proximity

STRATEGIC ALLIANCES
A strategic alliance is a partnership of two or more corporations or business units to achieve
strategically significant objectives that are mutually beneficial.
The nature of the partnership can vary widely. The costs and level of commitment for each type
of partnership can also vary widely, but they are typically less than in a merger or acquisition.
A strategic alliance = an agreement between two or more partners to share knowledge or
resources, which could be beneficial to all parties involved.
The formation of strategic alliances means that strategic power often resides in sets of firms
together. Alliances not only allow for exchange of technology but also for the exchange of skills
and know-how often referred to as competencies. In this way, firms can build knowledge
sharing routines.

The formation of a strategic alliance:

1. Selection of the right partner
2. Negotiations
3. Management towards collaboration

Reasons for entering a strategic alliance:

Concerns in Alliances
The major concerns for a firm trying to acquire technology through building an alliance can be
summarized as:
1. Finding the proper partner: This is critical for the success of the alliance.
2. Dealing with the ambiguities of the relationship: Because it is not necessarily a permanent,
well-defined relationship, the alliance may have unexpected political problems.
3. Discovering that the partnering firms lack a shared vision: A firm could discover that what it
thought it was going to gain from the alliance will not actually materialize.
4. Getting the timing right: Both parties must be able to respond when needed, but financial or
other strategic concerns may interfere with fulfillment of the alliance agreement.
5. Communicating effectively and efficiently between the alliance partners.
6. Protecting intellectual property: The organization should recognize the potential for loss of
knowledge that constitutes a part of the strategic advantage of the firm.
7. Measuring real costs and profits from the alliance: A firm needs to do a realistic cost/benefit
analysis. Many organizations find that the original analysis of alliance benefits and costs was not
realistic.

Risks of strategic alliances:

1. Competition rather than cooperation
2. Loss of competitive knowledge
3. Conflicts resulting from incompatible cultures and objective
4. Reduces management control
5. (Harms the firm’s ability to innovate)
6. Dependence on the supplier
7. Hidden costs.
8. Service provider’s lack of necessary capabilities.
9. Social risk.
10. Inefficient management.
11. Information leakage.

REASONS FOR THE FAILURE OF ALLIANCES BASED ON A REVIEW OF

STUDIES.
 Strategic/goal divergence
 Partner problems
 Strong–weak relation
 Cultural mismatch
 Insufficient trust
 Operational/geographic overlap
 Personnel clashes
 Lack of commitment
 Unrealistic expectations/time
 Asymmetric incentives

Joint ventures, two or more firms combine equity to form a new third entity. The level of equity
can vary from very small amounts to large multimillion dollar investments. The amount
contributed by each party will not necessarily be equal. It is common to have very detailed
agreements covering what each party is to provide, what each can expect, and how each is to
operate in the joint venture.
There are a wide range of motives for establishing corporate ventures:
 Grow the business.
 Exploit underutilized resources.
 Introduce pressure on internal suppliers.
 Divest non-core activities.
 Satisfy managers’ ambitions.
 Spread the risk and cost of product development.
 Combat cyclical demands of mainstream activities.
 Diversify the business.
 Develop new technological or market competencies.

A franchise agreement, a contract is established between the company (franchisor) and the
individual who buys the business unit (franchisee) to sell a given product or conduct business
under the companys trademark. The contract between these two parties typically specifies the
time period and geographical region where the franchisee has the right to conduct these
activities. The franchisor commonly sets standards for behavior by the franchisee in the
contract. Failure to follow these standards may result in loss of the franchise. The contract also
typically requires not only payment by the franchisee of an initial fee to buy the franchise but
also a continuing royalty.

Consortia are characterized by several organizations joining together to share expertise and
funding for developing, gathering, and distributing new knowledge.

A licensing agreement, one firm agrees to pay another firm for the right either to manufacture
or to sell a product. The firm selling the right to this product typically loses the right to control
various aspects of the product, such as pricing and how the product is marketed, when produced,
or sold by the licensee.

Negotiating a licensing deal:

 Terms for the agreement
 Rights granted – intellectual property rights that are granted
 License restrictions
 Improvements
 Consideration (monetary value)
 Reports and auditing of accounts
 Representations/warranties
 Infringement
 Confidentiality
 Arbitration
 Termination

Subcontracting of activities to other firms. These activities may or may not be high value-
adding activities to the business, but the activities outsourced typically will not be where the firm
s competitive advantage is built. The nature of the interdependence between the contracting firm
and the subcontractor will vary with each setting.

Main risks outsourcing:

1. Dependence on the supplier
2. Hidden costs
3. Loss of competencies
4. Service provider’s lack of necessary capabilities
5. Social risk
6. Inefficient management
7. Information leakage

An informal alliance, two firms agree to support each other’s activities in some manner. These
firms may begin this support without formal agreements either to promote a given product or to
aid each other in some way. The agreements are strictly informal. There are few legal protections
or means to enforce these agreements.

The critical questions that the partners entering a formal or informal alliance should ask
are:
1. Do we have clear goals and expectations? (Even with such clarity, partners also need to
recognize that conflicts will happen, but clear goals and expectations reduce the potential for
conflict.)
2. What is each member of the alliance responsible for, and what does each bring to the alliance?
3. Will each member of the alliance promise to develop solutions that will solve the problems
and needs of the members?
4. Will members promise to meet the goals of the alliance?
5. Who will be responsible if the solutions fail? What compensation will be offered?
6. What are the conditions for dissolution of the alliance?
7. How will disputes be resolved?

Mergers and acquisitions

Mergers and acquisitions are not mere linkages; rather, they are permanent changes to the
structure of the firms involved. A merger is a transaction involving two or more corporations in
which only one permanent corporation survives. An acquisition, on the other hand, is the
purchase of a company that is completely absorbed as a subsidiary or division of the acquiring
firm.
An acquisition refers to the outright purchase of a firm or some part of that firm.
In contrast, a merger occurs when two firms combine as relative equals.

Strategic Reasons for Mergers or Acquisitions

Mergers and acquisitions can allow a firm to accomplish a variety of strategic goals. The
merger/acquisition could allow the participating firms to:
 Enter a market quickly or increase speed to market
 Avoid the costs and risks of new product development
 Gain market power
 Acquire knowledge