I Have a Prototype, What Now?
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5 Key IP Considerations
Once your organisation, be it a large corporation or up-and-coming start-up, has realised Intellectual Property (IP) in the form of an invention or prototype the first question commonly asked is “How can it now be protected?”. There are a number of decisions and safeguards to address before any finances are put towards the registration of a Patent, Trade Mark or Design to name a few.
These decisions and safeguards all relate in varying significance to the individual forms of IP namely, Copyright, Trade Marks, Patents and Designs and finally Trade Secrets.
To Incorporate a Company or Not
The first decision is whether or not to incorporate your company in South Africa or abroad, as this will have an impact on available financing options from investors as well as potential exchange control considerations in the future. It is always a good idea to keep all your generated IP in the name of the same entity as this will provide security and mitigate against any administration issues or disputes relating to ownership in the future.
Securing ownership over your generated IP is incredibly important seeing that it is regarded as an “intangible asset” that will assist in attracting financing to the organisation or individual identified as the owner thereof.
In most instances, only the owner of the IP is entitled to register and/or commercialise it and there are scenarios where the person paying for the creation of the IP is not recognised as the first owner in law. An example would be when an organisation commissions a third party to generate IP, such as a computer program (app), an artistic work (2D design) or a technical drawing, to name a few. In terms of the governing law, the third party owns the IP or copyright in those works until an agreement is entered into transferring the IP into the name of the organisation.
That being said, if you have made use of a third party to generate any protectable IP it is very important to have an “IP Assignment Agreement” where ownership is transferred to you.
Do Your Research
A very important and effective way of avoiding unnecessary costs when trying to register one or more forms of IP, is to ensure that it is in fact available. Let’s consider trade marks or patents as an example, a trade mark can only be registered if there are no identical or confusingly similar trade marks that have already been applied for or registered. To secure a patent, you must ensure that a similar patent does not already exist or that the technology that is the subject of your patent has not already been disclosed/made available to the public.
To determine these questions, you can conduct your own research on what has already been made available in commerce to identify existing technologies or trade marks. Law firms that offer IP services provide this “search” service at a fee and it provides certainty as to whether you should proceed with your desired trade mark or patent or if it should pivot to a new idea or brand.
A relatively inexpensive and effective way of identifying trade marks is to conduct a free search of company names that have been registered in that territory. Company names are often made up of existing trade marks and this allows you to get a feel for what already exists without having to engage an IP firm or incur additional expense.
Methods of Protecting Your Prototype
As patents are expensive to obtain, the first step would be to ensure that a well thought out IP strategy is put in place. One of the most important questions that needs to be addressed in the strategy and before considering whether or not you want to patent your invention is “what do you want you want to achieve?”, for example:
Do you want the exclusive rights to make, use, sell, offer to sell or import the invention in particular territories?
Do you want to prevent third parties, such as competitors, to reproduce the invention?
Do you want to simply prevent someone else from patenting a similar invention and preventing you from reproducing the invention?
This strategy should further identify the countries/jurisdictions that are relevant from a business perspective and where suspected patent infringement is most likely to take place. For example, countries such as the United States and China have great manufacturing capabilities and, even though a product would not necessarily be sold there, it is likely that competitors would manufacture products similar to your invention in such countries.
A decision on whether or not to file a patent application is a business decision and various factors need to be considered before proceeding to the application. One factor includes taking necessary precautions to keep your invention/prototype confidential before disclosing it to any third party. This can be done with a confidentiality agreement or by including confidentiality clauses in your business contracts.
A second important consideration is whether a patent is the best financial option, as, in some cases, the scope of protection afforded by a patent is very limited . In such cases, a registered design may be an alternative, less expensive option to consider. It is important to know that a patent protects the way that something works, whereas a design focuses on its appearance and, at least, provides protection against the direct copying of an article. Registered designs do come with some advantages being that their requirements are less stringent and applications are less expensive than for patents. Importantly, with a registered design application, you do not necessarily have to disclose the way the invention works as a registered design simply relates to the appearance of it.
An alternative to a patent is keeping your idea/technology as a trade secret, which is simply a form of IP where confidential business information, that provides your competitive edge and is unknown to others, is protected. A trade secret covers both technical and commercial information. Its advantage is that it is a low-cost option to safeguard your invention and/or any confidential information. A simple clause in a contract can prevent employees from disclosing trade secrets.
Bear in mind that a trade secret owner cannot stop others from using the same technical or commercial information, if they acquired or developed it independently by themselves through their own R&D, reverse engineering, marketing analysis, etc. In some cases a trade secret would not be a suitable way of “protecting” your invention. If, for example, your invention relates to a mechanical device, it could be easy for a third party to reverse-engineer and build it themselves. There is the potential risk of a disgruntled employee disclosing trade secrets publicly, in which case you may have recourse against the employee but not against third parties who then use the information for commercial gain.