Introduction

Competitive advantage in today's business environment takes on many forms but none are more important than the advantage of invention - pioneering an idea, developing a process or creating a product that no-one has thought of or produced before.

Companies in the field of high technology know very well that this Intellectual Property - the umbrella term for Patents, Trade Marks, Designs and Copyright - is the catalyst for their success. These companies know that the protection of their vital Intellectual Property resources is essential for survival.

Most people will have heard the stories of the invention of the Black and Decker Workmate, the Patent battle between Polaroid and Kodak over the instant camera market, and the inventor of the intermittent windscreen wiper. However, there are many companies and individuals in Ireland who are quietly pursuing Patents for their technology and very few of these companies receive any substantial publicity.

Theory

A Patent is a statutory grant, by Government, which confers on the proprietor, the right for a limited period of time, to exclude others from using the invention. This exclusive monopoly granted by a Patent is given in return for the inventor making the details of the invention public by writing them down into a Patent Specification.

The purpose of the temporary monopoly given by a Patent is:

To encourage research and invention

To enable the inventor to recoup his costs of invention, development, production and marketing of product.

To encourage dissemination of technology and know how, by inducing the inventor to disclose details of his invention through publication of Patents.

To provide an incentive for future capital investment in current and future research that will result in future inventions.

For most industries, Patents are the only practical means of securing enforceable long-term protection. A Patent confers on the Proprietor the exclusive right to manufacture, sell or use the technology covered by the Patent. Thus, a Patent may be infringed by manufacture, sale or use of a product or process.

Critical Steps

The following are the critical points in relation to PATENTS:

Do not disclose your invention to anyone, except under a written Confidentiality Agreement.

Discuss the details only with a patent attorney.

If the concept is considered to have patent potential, a detailed specification will then be drawn up and filed.

There are then 12 months, before the final filing, in which to amend any details of the invention, decide in which countries to file and arrange the necessary finance.

In each country the priority date will be that of the first filing date in Ireland.

It is not possible to subsequently file a valid application in any other country and enjoy the priority date.

In other countries where a patent does not exist, the product can be legally copied and marketed by others. However, they cannot import the product into a protected country.

The life of a patent is usually 20 years.

An inventor may (under certain circumstances) receive royalties, free of Irish income tax, during the life of a patent.

What is a Patent

A Patent is a monopoly for the manufacture, sale and use of an invention (a new product, machine or manufacturing process) for a limited period of time, normally twenty years.

Do not disclose an invention to the public until a Patent Application has been filed. A Patent Application normally comprises a technical/legal description of a new product or process together with some drawings or flow charts, as appropriate. Once the Application has been filed, the invention may be disclosed and there then follows a twelve month period within which one must decide whether or not to proceed to final Patent or indeed whether or not to secure International Patent Protection for example, throughout Europe, the U.S.A., Australia, etc.

In securing Patent protection for a new product or process, one must consider the main markets for the product, in addition to countries where potential competitors have a manufacturing base. It is also worth considering countries where it might be possible to find a licensee. The European route enables one to obtain protection in a possible 32 countries, and the PCT (Patent Cooperation Treaty) route opens up the possibility of securing Patent protection in most of the industrialised countries of the world.

Worldwide Patent Protection

The foreign Applications must be on file within twelve months of filing the basic Application. The cost of obtaining Patent protection in a large number of foreign countries can be substantial, ranging anywhere from €3,000 to €20,000 depending on the number of countries concerned. One basically has to assess the cost against the commercial value of the monopoly position in the various markets. This must be a business decision and before incurring such costs, one must be fairly sure that this will produce a return. In considering the cost, one should also consider the expenditure already incurred in getting the product to the prototype and production stages and should be in a position to put a value on the technology.

Everyone can be an Inventor

Far too many of us believe that being creative is way outside of our capabilities and, to be an inventor, one must be an Einstein. This is far from the case. A huge number of the best known inventions were developed by people who came from different walks of life to the subject matter they created.

It would be fair to assume that an engineer invented the ball-point pen but in fact the idea was developed by a Hungarian hypnotist. Equally surprising are the inventors of the following list: Frisbee, a building inspector; Monopoly, a heating engineer; Photocopier, a land-claim official; Brillo, a manufacturer of costume jewellery and the Telephone Answering Machine, an American businessman!

Therefore, if the likes of these can do it why can't you? Every day in manufacturing, for instance, people come up with novel ways to get the job done. Oftentimes, this is merely to overcome an obstacle, get it out on time, and rush onto the next task. But the same applies to everything from farming to services. Something is put together to solve a problem whether that be using a piece of farm machinery or implement in an unusual way; coming up with a new way of fixing a garden hose or stopping a pot from boiling over on the cooker. If these are of use, and solve a known, regular problem, then they are of interest to others who encounter similar difficulties.

This makes the solution of commercial interest and people may be prepared to pay to get their hands on the problem solving device. In the first instance this produces the basis for a marketing opportunity, whether one intends to sell the concept to a third party to exploit or handle that function ones-self. But, in addition, the new solution may be capable of being patented and so bestow on it exclusivity in targeted markets.

Many inventions are improvements on existing items and/or combining two known elements from other areas in a novel way in another. You should also realise that simplicity is no objection to patentability. In addition, there is an advantage in "being first and brand it". You can apply for a patent which allows you to put "Patent Pending" on your invention and this may dissuade others from coping you for fear of infringing your patent. Then launch your product under a trade mark which you have registered. The potential rivals will not know the details of your invention for at least 18 months and this will allow sufficient time for you to establish your product on the marketplace and have the public become familiar with your trade mark. If you are granted a patent it has a life of 20 years (under certain circumstances royalties can be free of Irish income tax) but a trade mark can be renewed every 10 years, for ever!

To obtain a patent one has to demonstrate that the invention is new, that is, it does not exist elsewhere in the world to the best of your knowledge; that it is non-obvious or conversely that it contains an "inventive step". This latter point can be difficult to define but some examples may help to illustrate what is required. Everyone is familiar with the Dunces Cap shape of cone that is used as a traffic beacon. Similarly, we are familiar with a plastic ball. However if the two are combined so that the ball is stuck into the large opening of the cap then the resulting combination can mean that when the beacon is knocked over it will revert to an upright stance much like a roly poly doll. This then shows how the novel interplay of two known items, thanks to an inventive step can result in a patentable new product.

Therefore the capability to come up with an invention is within the grasp of most of us. We either don't recognise the value of what we do or are ignorant of the steps that can protect and exploit the fruits of our labours.

The benefits of having a patent are many. It can be the foundation for a fledgling business, it can be sold to someone else for cash and royalties, it can be used by you and licensed to others, or you can make an outright sale. The possible permutations are too numerous to list here and depend on the differing circumstances that can emerge. If you do have something that you think might be the basis of an invention there are some basic rules and guidelines about which you should be aware. In the first instance, do not disclose your invention to anyone, except in confidence. Discuss the details only with an experienced European Patent Attorney who will be able to assist in assessing whether the concept could be subject to patent protection. If this proves to be the case then a detailed specification can be drawn up and filed immediately. There are then 12 months, before a final filing, during which you can amend any details of the invention, decide in which countries to file and arrange the necessary finance.

In each country, the priority date will be that of the first filing date in Ireland. After the time of the final filing it is not possible to subsequently file a valid application in any other country and enjoy the priority date. Therefore it is essential to examine the potential for exploitation in all target markets and make your selection because, in countries where a patent does not exist, the product can be copied, and marketed, by others.

The life of a patent is usually 20 years and an inventor may, under certain circumstances, receive royalties, free of Irish income tax, during the life of the patent. Research and development costs can also be set off against tax. The Finance Act, 1996, introduced changes in the tax exemption provisions so it is advisable to discuss such matters with your financial advisor in respect of your particular situation.

Once the invention has the potential of gaining patent protection it takes on the mantle of being a more valuable commodity. It is necessary to consider whether one goes it alone, requires some form of assistance from others by way of finance or marketing skills or whether a sale or licensing agreement with a third party is more suitable. With the latter option it is advisable to again enlist the aid of a patent attorney who will be experienced in this area and can prove to be invaluable in negotiations.

Whatever decision is taken, an important consideration relates to branding of the invention. Most, if not all, inventions are recognised by their trade mark rather than their technology. Consequently, ownership of the name is all important. A trade mark can be protected indefinitely while the lifetime of the patent is limited to 20 years. The trade mark can have statutory protection and exclusivity all over the world forever!

In conclusion, do not dismiss any ideas you may have, out of hand. Remember that many of the world's great inventions came from people just like you. There is great satisfaction, as well as financial rewards, in bringing into being something that you have devised that is benefit to others. Contact a patent attorney and take the first step down the path to, perhaps, securing a business opportunity that enjoys statutory protection in relation to trade mark, exclusivity through patent and potential tax free earnings.

Ownership

Employee-employer relationship governed by common law of master and servant. Inventions made by employees which are related to employer's business belong to the employer. Companies should have contracts with outside consultants which specify that all Intellectual Property Rights belong to employer. This is particularly important in relation to software industries.

Practical Advice

Awareness of Innovation

Companies should establish procedures to ensure that all product development is referred to a senior official within the company. A useful way of doing so is to make an invention disclosure form available to employees and to ensure that any potential inventions within an offering are considered for patentability prior to release.

Innovation and Confidentiality

Controls must be in place to ensure that any innovation is maintained confidential until an Application has been filed. Employees should be made aware not to disclose or misuse innovation. There should be a sense of awareness amongst employees and innovation should be restricted on a need to know basis. Companies should take care in releasing details of innovation outside of the company. The company should keep detailed records of the development of new products or technology.

To Patent?

Patents are the only means of securing a true monopoly:

• Patents give no right to manufacture
• The filing date is crucial
• Speed in filing is important
• Patents are not necessarily valid
• Patents require the disclosure of the technology
• Obtaining Patents can be expensive (money and management time) and renewal fees are payable
• Competitors or potential competitors watching you?
• How important is the product?
• Must treat Patent protection as potentially very important
• Simplicity no objection

Golden Rule

No disclosure of an invention should occur prior to the filing date of a Patent Application. Any disclosure which does occur, if provable, could be used to invalidate any Patent subsequently granted. It is therefore absolutely imperative that a Patent Application be filed before a company discloses a product in the marketplace or offers the product for sale

E-Commerce

In the past, computer software or business methods was considered unpatentable. This is no longer the case. Great strides have been made in the US, and Europe is closely following this lead. It should now be taken for granted that, in the near future, a wide variety of software and business methods will be patentable. The main complaint now is that many of the US granted patents are far too broad in their scope. Some parties claim that these new patents could allow the owners to demand royalties, for instance, from almost everyone involved in doing e-commerce. It is essential therefore to secure patent rights without delay, otherwise, if you are pre-empted, you may not be able to use that which you have already created.

Let us suppose you have developed, or are in the process of completing, an inventive way of doing something which impacts on business and, more than likely, also on the Internet. It is highly advisable to apply to patent any new element even though further work needs to be done to make the whole, complete. Failure to take this intermediate step can result in never being able to go further because of the actions of others.

If they file for a patent and any part of your invention falls within the scope of their claims you are snookered! You may never be able to introduce your product or service because it may infringe another's patent. This embraces not only software but also novel business methods. In addition, if someone discloses such novelty on the Internet - and they may not have sought a patent - then no one can successfully seek exclusive rights to the new software or business method. This is because it fails the novelty requirement (essential for a patent) it is now in the public domain.

So the lesson to be learned is move fast. Otherwise anyone without patent rights will be at the mercy of those who have them, or didn't bother to seek protection for their creations. Either way, valuable royalties can be lost forever. On the other hand if you do obtain exclusivity through patenting then you can either maintain a solus position or enjoy royalties by licensing the patents to others.

Therefore everyone should assess their position, whether it be in the area of software or the development of new business methods, to ascertain if any or all of it can be patented. A discussion with an experienced patent attorney will quickly determine the true position.

The first US Internet patent was applied for in 1988 by the Digital Equipment Corporation (now Compaq). There are now about 13,000 European patents relating to software and 75% of these are held by non European companies. This highlights the fact that a huge number of mostly American concerns are establishing Intellectual Property rights in Europe. Such action will more than likely frustrate many by blocking innovation before it gets a chance to emerge.

There is a widely held misconception that, if you have not copied something, you need have no worries about infringing the rights of others. Wrong! If your product or service is original but someone else holds a patent for part or all of it, they can stop you in your tracks.

Patents are territorial that is they apply to the countries in which they are granted. If you offer something for sale over the Internet you may be infringing patents anywhere in the world. Likewise if someone else makes a disclosure via the Internet, the whole world knows about it and, maybe, "pop" goes your possible invention.

Intellectual Property (IP), particularly trade marks and patents, is becoming more important to the bottom line of large and small companies and is their most valuable financial asset. It is making companies more attractive to bankers, venture capitalists and take-over specialists than ever before. Enterprises are being purchased for far in excess of their book value because of their attractive trade marks. It is revealing to study the percentage value of IP to the total market value of some new and old businesses. For example, Amazon.com 98%; The GAP 90%; McDonalds 73% and Disney 68%.

A great many companies are licensing out their patented technology and making more money from this than their core business. IBM, last year, collected $1 billion plus in licensing fees by allowing over 1,600 companies make use of its patents. Even if a company's main stream business has a downturn, royalties can be unaffected and provide income for 20 years (the lifetime of a patent).

Deciding on where to pitch such charges is a subject of much conjecture and debate. In the case of shrink-wrapped software a two year study of licensing evaluation, compared with modified replacement cost, has determined that a 5% royalty fee is justifiable, practical and competitive.

Apart from the obvious advantages of having a portfolio of patents, some of which have been enumerated earlier, there other, strategic ones for your armoury. One of the best defences in software patent litigation cases is that of counter suing. If a competitor sues you for infringement, and you have a number of software patents, it might be that he is infringing part of your patents and a bargaining or stand-off situation can result. Similarly, the competitor may discover that he wishes to utilise some of your patented technology and a cross licensing arrangement may evolve to everyone's satisfaction. Even if there is a part cash settlement, this burden can be less onerous than if there had not been a partial trade-off.

Every business, particularly those in the area the new technologies or those utilising the Internet and e-commerce, should, as a matter of urgency, have a review of work in progress with a patent attorney. This will help determine what provident steps are to be taken to protect and capitalise on potential future developments and earnings. Failure to do so can have dire consequences.