10/05/11

By Philippa Montgomerie, Partner in DLA Piper Scotland’s Intellectual Property Group

While most companies recognise the importance of registering their Intellectual Property, many fail to protect their patents when they are challenged by competitors.

Often, this is because they fear that to do so would be expensive and time-consuming. The consequence? The full commercial potential of their innovation is lost as their ideas or technologies are appropriated and exploited by their rivals for their own gain.

Nowhere is this more important than in the technology sector where a robust IP position is vital to protect the cutting-edge innovation on which companies’ success is predicated. For firms in the life-sciences, electronics, oil and gas and renewables sectors, which rely on new technologies to steal a march on their competitors, protecting intellectual property rights must be a fundamental part of their business strategy.

Many companies I speak to have registered their IP rights but don’t realise how important it is to talk to advisers at an early stage about how to put in place a strategy to protect them. Securing a patent is just the beginning of the story. Because IP rights in the main give the owner a monopoly right they are of most value if they are enforced against competitors.

Often companies, particularly smaller ones, think that they can’t do anything about challenges to their patents because they can’t afford to. Alternatively, they do not want to enforce their own IP in case they are drawn into costly disputes. However, there are relatively inexpensive strategies that they can put in place, or be ready to put in place, in order to protect or preserve their market position. Failing to do so can allow rival companies overtake them by exploiting their cutting-edge technology.

For example, assessing at an early stage, the relative strengths and weaknesses of your position and the competitors could give you leverage to negotiate a better commercial position - such as a cross license of overlapping technologies or a jurisdictional monopoly - without resorting to court action.

If a dispute does arise, many companies are choosing to instruct Scottish IP lawyers to argue cases that are being heard in England because it is more cost-effective than engaging the services of lawyers in London. Clients can benefit from the same level of legal expertise for half to two-thirds of the typical London fee.

Although IP litigation is comparatively rare, disputes are fairly common. Litigation is generally undesirable because it is costly - both financially and in management time -sometimes prohibitively so for a small company. Also, the outcome can be uncertain.

On our experience, most IP disputes are resolved without litigation, through negotiation, mediation and arbitration - finding the ‘win-win’ solution that both parties can live with.

There are situations that tend to favour one of the other method of resolving a dispute - for example a situation where parties have an ongoing relationship outside of the issue in dispute is often best resolved in a structured negotiation / mediation. Sometimes it is best to wait the situation out and see how the landscape changes in time - however, do this having gained a full picture of what rights you may be relinquishing by not taking the action now.

The key is being properly informed of your options at an early stage, weighing up the pros and cons and making an informed strategic decision rather than not taking any action at all in case it is costly.

Questions we've found that are most usefully asked at the outset of any dispute include:

What do I want / need to achieve? What are the key issues for our business? What jurisdictions are important? How much is this IP worth? What resources do I have, in time and money? Is it worth it - how strong is my position anyway?


By way of guidance, here are some helpful tips to prevent or resolve IP disputes:

Get your IP right at the start. Register your intellectual property and make sure your patent application is as strong as possible and covers your commercial plans

Look after your IP portfolio. Keep it up to date; ensure territorial coverage is adequate and relevant to your commercial activities. Make follow-on patent applications for improvements

Make your IP known. Mark your products or technologies “Patented” or ®

There are two sides to every IP dispute. Be aware of other party’s IP and what the gaps are between the two

Forewarned is forearmed – locate third party IP before it becomes a problem

Can you attack third party IP before you get to a dispute? Many options are available, some allowing you to strike at IP anonymously such as through a centralized European opposition procedure

The relative strength of both parties are a big factor in any dispute, but there may be ways you can level the field

Due diligence and preliminary analysis of your and/or the other party’s IP portfolio will save you time and money in the long run and allow you to make an informed decision on the options that best suit your circumstances, resources and needs

Does your company insurance policy dictate the options you have? In any event you should notify your insurers early. Discuss with your advisers whether there is a policy to reduce your costs exposure - both yours and a third party's

Control any early communications so as not to make inadvertent threats, waive privilege on confidential documents or make admissions in settlement discussions that could be held against you

Get specialist professional advice early from advisors that understand the legal AND commercial issues at stake