For business owners the global success of a product or service is the ultimate achievement. Advancements in technology and the breaking down of trade barriers mean international trade is now easier than ever.
When exporting, it’s important to analyse the threats and opportunities, and one key consideration is protecting IP. Where IP is exported, use of the IP should be controlled by the exporter so that any value and goodwill arising through use of the IP accrues to the exporter, and not the distributor, for example, and so that the use does not fall foul of local laws.
The easiest way to control use of IP is through registration. Contrary to common belief, just because an IP right is protected in one country, does not mean that the exporter has an automatic right to use the IP in another country. An IP right is territorial and exists only in the country in which it is protected. If a business actively targets customers in another country, it should ensure that its IP is protected there.
Protection of IP for an exporter has a number of benefits including the following:
Compliance
IP laws differ from country to country, making it imperative to ensure that the IP is compliant with IP and export laws in the country of export. One cannot assume that the registration of IP in one country complies with use of the same IP in another country. By protecting IP before export begins, the exporter can be confident that when export commences, the IP is compliant with local laws.
Control
IP registrations provide the owner with the exclusive right to use the IP. Securing protection of the IP right in the export country of interest ensures that only the exporter or parties with its consent are able to use the IP in that country. Leaving the IP unprotected may pave the way for a third party to make unauthorised use of the IP, or even, secure protection for the IP themselves, which can then be enforced against the exporter.
If IP is registered in the export country of interest, the exporter also has leverage to negotiate with distributors, manufacturers, licensees etc. to ensure that all use of the IP is consistent. An unregistered IP right is harder to regulate, enforce and protect against misuse.
Increased value
IP is a tangible business asset that accrues value through use and protection which increases the attractiveness of the business to a potential investor. If IP is registered in and exported overseas, an investor is secure in the knowledge that use of the IP in the exported country is free from risk which means he is more likely to invest in the business. If the IP is not protected in the export country of interest, the value of the IP is decreased because there is more risk associated with use of the IP there.
Future income
Registration of IP in export countries also assists the exporter in licensing the IP to third parties. Many licences are royalty-bearing, which increases the income the exporter derives from the IP. This is attractive for exporters who may not wish to incur the costs of exporting products overseas but wish to benefit from its use there. However, licensing unregistered IP makes it difficult for the exporter to retain control over the IP and ensure that the rights and goodwill arising out of the licence accrue to the exporter.
Avoid infringement of anothers IP rights
Seeking protection of the IP right in the export country of interest prior to commencing export, helps to identify any existing third party IP rights that may pose obstacles to the use of the IP right in question in that territory.
If use of the IP infringes an earlier IP right, court action may ensue with damages payable to the earlier IP right holder and/or the court ordering an injunction which prevents use of the IP in question by the exporter and/or its licensee, distributors or manufacturers etc. In addition to the high costs of defending the infringement action, there rebranding costs will arise and there may be damage to reputation. Defendant(s) may even be imprisoned.
It is not uncommon for distributors or licensees to request confirmation that the exported IP does not infringe third party rights, and/or to seek indemnities from the exporter in the event of infringement. These warranties and indemnities should only be given where the exporter is certain that the IP does not infringe the IP of another. Therefore it is important to make sure that the IP is free from infringement and the exporter has the right to use or export the IP in the country of interest.
In summary
IP is important to strengthen a business, and generate value and income. Early consideration of IP overseas will ensure that the exporter has control of its IP, which in turn will result in smoother export activities and greater business returns. In the event of third party infringement, not being able to sell in a key market can be costly and damaging for a business. Securing IP protection in advance gives IP holders the confidence of being able to expand its business without risk.
Gemma Kirkland is a trademark attorney at D Young & Co
