Common ‘soft’ IP related mistakes made by SMEs
by Donal O’Connell, Managing Director, Chawton Innovation Services
IP value and risk:
Risk is the chance of something going wrong, and the danger that damage or loss will occur. By its very nature, there are both rewards and risks associated with IP. For anyone involved in IP, then IP-related risks are part of working life.
However many ignore the risks associated with IP or only react when the risk has materialised, which is most times too late. Also, many of the IP-related risks that companies face are due to their own lack of awareness or proper understanding of IP, and/or their own actions or lack of actions.
There are multiple forms of IP such as patents, trademarks, copyright, etc. etc.
The term ‘soft IP’ is sometimes used to refer to trademarks, copyright, and domain names, in contrast to ‘hard IP’, which is sometimes used to refer to patents.
I accept that use of this phrase is controversial among some IP practitioners, and that the term ‘soft IP’ may mean slightly different things from one IP practitioner to another.
This paper focuses on soft IP and in particular on trademarks, domain names, and social media handles, and some of the common mistakes made by SMEs as far as these forms of IP are concerned.
A significant number of SME companies were assessed from a soft IP perspective. The SMEs were selected from a diverse range of industry sectors and included micro, small, and medium-sized enterprises.
Following the assessment, the key mistakes already made or being made by the SMEs involved as far as soft IP is concerned were gathered and analysed.
Some of the most common mistakes are listed here. They are not listed in any particular order. Many but not all of the findings from the assessment are published here.
The common mistakes:
- Assuming that registering the name at Companies House is enough:
A number of the SMEs in the study were simply confused between registered their company at Companies House and registered a trademark and a domain name. Registering the company name at Companies House provides no IP protection.
Just for reference, Companies House is the UK’s registrar of companies and is an executive agency and trading fund of the UK Government.
- Assuming that registering the name with some domain name registrar is enough:
A number of the SMEs in the study were simply confused between registered a trademark at the Trademark Office and registering a domain name with some domain name registrar. A domain name registrar is an organization or commercial entity that manages the reservation of Internet domain names. Such registrars have absolutely no involvement with trademarks registration.
- Selecting a name without considering how easy it will be to protect:
Calling a business, product, or service a commonly used word such as ‘Apple’ is going to be much harder to protect than a name like ‘Adidas’ because Adidas is a made-up word.
You may recall that between 1978 and 2006 there were a number of legal disputes between Apple Corps (owned by The Beatles) and the computer manufacturer Apple Computer (now Apple Inc.) over competing trademark rights.
- Failure to consider new gTLDs:
The recent introduction of new generic Top Level Domains (gTLDs) represents one of the biggest changes to the Internet since its inception. It provides opportunities for companies and brand holders to re-energize their online domain name strategies, but it also poses some risks if companies fail to act.
It is interesting to see what many banks have done. The Risk function rather than the IP function within financial services companies has recognised the importance of domain name management.
Many banks and financial services firms acquired their own dot brand new gTLDs to enhance stability, increase security, and reduce phishing attacks – .Barclays; .HSBC; .AIG to name but a few.
- Selecting a business name or product name that is similar to an existing brand:
A number of the SMEs had selected names for their products or services which were not identical but were very similar to existing brands. They mistakenly thought that because there were not 100% identical, that this would not be a problem.
I suggest that a men’s barber shop avoids calling itself GMALE.
- Not thinking beyond their home country:
A significant number of the SMEs failed to register domain names and trademarks in foreign countries, and in countries they actually planned to enter in the short to medium term. The risk, of course, is that competition or a local business will register the name instead and so makes defending rights more costly.
One of the most common misconceptions about trademark rights is the notion that one automatically accrues rights abroad, when in fact trademarks are “territorial” in nature. “Territorial” rights apply, rather intuitively, only within the borders of the country where they are obtained.
- Not registering trademarks with Customs:
Counterfeit goods can include fake designer clothes, bags, watches, accessories, and perfumes as well as pirate DVDs, CDs, smartphones, and computer games. They can also include medicines and components of automobiles and aircraft.
The size of the problem posed by counterfeiters is staggering. According to FBI, Interpol, World Customs Organization, and International Chamber of Commerce estimates, roughly seven to eight percent of world trade every year is in counterfeit goods.
IP theft poses a risk to all industry sectors; those most commonly affected by IP theft are manufacturing, consumer goods, technology, software, and biotechnology, including pharmaceuticals.
To help stop counterfeit products crossing borders, it is strongly advised to register your trademark with Customs, and to have a regular training program in place with them.
- Not securing social media handles:
Consumers increasingly rely on social media, irrespective of how they make the actual purchase: via clicks, bricks, or a mix. Retailers and brand-builders cannot overlook this phenomenon and clearly many brands have now embraced this social media world in one way or another.
More and more brands are working to optimize their online presence, protect their brand equity, and drive profitable e-commerce sales growth.
Today launching a company, product, or service without an associated Twitter, Facebook, or Instagram account being available can make communication with the target audience very challenging.
For example, according to Instagram’s terms and conditions, using another’s trademark in a way that has nothing to do with the product or service for which the trademark was granted is not a violation of Instagram’s trademark policy. Instagram usernames are provided on a first-come, first-served basis and may not be reserved.
- Not checking the name is available in target countries:
We saw a number of SMEs and their marketing folk come up with some great product names, and produce some great marketing literature, only for them to then discover that somebody else already had the name registered in one of the major countries the SME was planning to enter.
A simple search would have avoided such problems.
- Not checking the meaning of the name in target countries:
Some SMEs assessed had conducted availability checks on names but had failed to conduct any foreign language checks. So the selected names were available in English but did not know if they were available in key foreign languages.
You may recall that story about General Motors launching a new car range some years ago in Mexico but sales did not take off as expected. The model was called NOVA which sounds nice in English but in Spanish means “doesn’t go” – not a good name for a car.
- Not having trademark and domain name watching services in place:
It is the responsibility of the trademark owner to protect their brand. It is therefore important to have at least minimum services in place to identify infringements.
- Defensive domain name registrations:
None of the SMEs had considered defensive domain name registrations. This involves considering variations on a trademark that might be used by a cyber squatter. For example it might be worthwhile to register both Apple.com and Apples.com to avoid costly UDRP (uniform domain-name dispute-resolution policy) cases in order to recover the name.
- Not raising their profile with law enforcement:
This links strongly to that earlier issue about working with Customs. A common complaint of law enforcement is that they find products they believe are counterfeit but they do not know who to contact to confirm the legitimacy of those products.
- No IP insurance:
IP insurance was not on the radar of these SMEs. There can be advantages in taking out IP insurance to defend against larger companies taking action against the SME because of a perceived trademark infringement.
Case studies provide a means for highlighting and extracting practical principles and methods for shaping and accelerating progress in solving real world problems.
Soft IP issues or risk management is a practice that deals with processes, methods, and tools for managing IP issues or risks in a project, business unit, or organization. It is initially about the identification, assessment, and prioritization of IP-related issues or risks followed by the coordinated and cost-effective application of resources to reduce or eliminate the probability and/or the impact of these IP related issues or risks to the organization.
Soft IP issues or risk management involves understanding, analysing, and addressing IP-related issues or risks to make sure organizations achieve their objectives. So it must be proportionate to the complexity and type of organization involved. Proper IP issues or risk management is an integrated and joined up approach to managing IP-related issues or risks across an organization and its extended networks.
I trust that this case study and the common issues listed are of interest and of value to anyone involved in the proper management of soft IP.
Although the assessment was conducted on SMEs, I should state that I have come across large companies making some of these same mistakes.
Donal O’Connell is the Managing Director of Chawton Innovation Services, a firm which offers consultancy in the areas of innovation and intellectual property management, and also licenses a number of IP software solutions to clients. Previously he enjoyed a 21-year career at Nokia, where he had such roles as VP of R&D and a Director of IP.
He’s an Adjunct Professor at Imperial College Business School in London, teaching about IP management. He is also the author of two books, “Inside the Patent Factory” and “Harvesting External Innovation”, along with hundreds of papers which have been published in magazines, websites, and blogs around the world.