A strong IP strategy is a vital part of any business, especially in the resources sector where innovation has historically provided key competitive advantages.
All businesses face tough competition in the marketplace, and the number of competitors and the intensity of that competition only increase over time. In the resources sector, which is often characterised by volatile commodity prices, for a business to sustain a competitive advantage it must have a thorough understanding of its core competencies as well as what differentiates it from its competitors. Based on that knowledge, the business can then investigate what forms of intellectual property (IP) protection best serve it.
The business should also understand what IP it thinks it has and what IP its competitors may have. Once the answers to these questions are known, the business should ideally investigate whether it is free from competing third-party rights, and whether it needs to licence in or develop more IP to enable it to sustain its competitive advantage. Ideally, these investigations should be ongoing and the business should regularly review its IP rights to ensure that they align with the business plan.
The subject of this article is very broad, and one cannot do justice to every topic in this brief overview. This article will endeavour to provide a summary of the main points that should be considered, and highlight that IP rights are important for any business in the resources sector.
What is intellectual property?
It is important to understand what is meant by IP, its ‘categories’, and how these can be used in a business context. One simple definition of IP is ‘the property of your mind or proprietary knowledge’. As such, IP may encompass everything from literary and artistic works to branding and reputation, industrial and scientific innovations and know-how.
The main forms of IP that are relevant in the mining sector are:
- patents, which protect inventions such as new products and processes
- trademarks, which protect indicators of origin such as brand names, logos, packaging, sounds, scents, colours
- designs, which protect the appearance of products such as their shape or pattern
- copyright, which protects independently created works such as text, drawings, plans, manuals and computer programs
- trade secrets, which protect confidential information.
Of the above, only patents, designs and trademarks are registrable forms of IP. In Australia, each of these rights must undergo a process of examination by IP Australia, the government body comprising the Australian Patent Office and Trademark Office that is empowered to review IP applications and grant exclusive rights. Non-registrable IP rights include copyright, confidential information, trade secrets and know-how and, to some extent, reputation.
A significant advantage of registrable forms of IP is that they are an easily tradable asset, which can be bought, sold, licensed or mortgaged. Furthermore, IP is a multi-purpose and strategic business tool which, for example, can lock competitors out of a market either directly or by providing a business with a specific cost or capability advantage. Alternatively, IP may be used to generate revenue, eg as a royalty stream from licensing, or it can attract venture capital or research funds. It can also simply serve as a marketing tool.
What do patents protect?
Imagine your business has spent time, effort and money inventing a new device, process, system or chemical substance, which you believe will provide a commercial advantage over your competitors. You may attempt to protect the invention by keeping it a trade secret. However, nowadays almost any product released to market may be reverse-engineered and methods, trade secrets and know-how invariably transition with personnel. The only real alternative is to file a patent application.
A patent is legally enforceable and provides ‘negative rights’, in that the owner has the right to exclude others from exploiting the invention for the 20-year life of the standard patent. It is worth noting that a patent does not signify commercial usefulness or success of the invention. This is partly because the criteria for patenting (novelty, inventiveness and usefulness) are different from the criteria for commercial success, and partly because a great deal of effort is normally required to bring a successful product to market, irrespective of whether a patent has been granted. Patents are the only means of securing a monopoly for a technical invention, can act as a deterrent to competitors, and patented products may command premium prices.
What is patentable?
For an invention to be patentable in Australia, it must belong to the ‘useful arts’ rather than the ‘fine arts’, it must provide a material advantage and its value to the country must be in a ‘field of economic endeavour’. This is a very broad test, and over time authority has determined that a very wide range of fields of art meet the test and are patent-eligible.
There are several threshold requirements to be eligible for patent protection, the main two being novelty and an ‘inventive step’. To be novel, a patent claim must define a new combination of features not previously known to the public. The issue of an inventive step is a little more complex and involves an assessment of whether, in light of what was already known, it would have been obvious for a person of ordinary skill to arrive at the invention. The word ‘obvious’ suggests a development that does not go beyond the normal progress of technology, but merely follows plainly or logically from the prior published literature (known as the ‘prior art’).
However, judicial interpretation has also recognised some categories that will fail to satisfy the above test. These include mere discoveries, ideas, scientific theories and laws of nature, schemes or plans without technical implementation, mathematical algorithms and mere presentation of information.
The resources sector, with its proclivity for inventing new industrial processes and its significant economic contribution, is a field where patentable IP has flourished. Examples include:
- The ‘Dragline bucket’ owned by CMTE Development Limited, which provides separate front and rear hoist ropes attached to front mounting points and rear mounting points of the bucket, thereby allowing the front and rear hoist ropes to be independently operated to vary the horizontal attitude of the bucket (Australian Patent No. 2004207143).
- ‘Precipitation of zinc from solution’ owned by Xstrata Queensland Limited. In this invention, a solid zinc containing material and gypsum is caused to precipitate without substantial precipitation of magnesium, whereby the zinc material can be selectively recovered in high purity (Australian Patent No. 2012212381).
Two types of Australian patents
Australia has a two-tiered patent system. The standard patent has a term of 20 years, is substantively examined by the Patent Office and, prior to grant, is advertised to allow third parties to oppose.
The innovation patent is a shorter-term Australian patent valid for a maximum term of eight years. Innovation patents have a comparatively lower threshold test for inventiveness and a streamlined examination process, making them particularly advantageous as a means of obtaining patent protection at relatively low cost or to protect products or processes that may not satisfy the threshold test for standard patents. Innovation patents can also be powerful commercial tools in the context of patent enforcement, because they are quick to obtain and notoriously difficult to challenge. Recently the government has indicated the innovation patent regime will be abolished in 2018.
What is a trademark and what does it protect?
A trademark is a sign or other device used to indicate the origin of goods and services, including brand names, logos and aspects of packaging. Generally, the proprietor of a registered Australian trademark has a legally enforceable right to the exclusive use of the mark within Australia in relation to the goods or services covered by the registration.
There is no requirement to register trademarks in Australia as a precondition to use, and often brand owners simply apply the ™ symbol to their unregistered mark. However, registration (®) provides many advantages, including enforcement, brand protection and commercialisation. A trademark registration can remain in force indefinitely, but if the trademark is not used, it may be at risk of removal from the register.
To be registrable, a trademark must distinguish the goods or services of one trader from others. In other words, it must not be descriptive of the goods or services themselves, as registration of a purely descriptive word could hamper other traders wishing in good faith to use that word as a genuine description of the same type of goods or services.
For example, a trademark for the word ‘Loader’ in relation to ‘vehicles for mining and earth moving’ is not capable of distinguishing those goods, because it directly describes them and other traders will likely want to use the term loader to describe the same type of goods.
Although there are exceptions, words that are common surnames (eg ‘Smith’), geographical names (eg ‘Kalgoorlie’), purely laudatory (such as ‘Best’ or ‘Number 1’), or directly descriptive of the relevant goods or services are generally not registrable or can be registered only after becoming distinctive through use. Registration will also usually be refused if the trademark is identical or deceptively similar to another trademark already registered in relation to the same or similar goods or services.
Common law and Australian consumer law provide remedies against persons seeking to cash in on another’s eputation by making unauthorised use of a confusingly similar trademark on the same type of goods or engaging in misleading or deceptive conduct.
Good management of intellectual property
When it comes to managing IP, it is always best to start simple. The first step for a company should be identifying and capturing its IP. If the processes are too complex, then the key people involved are likely to give up before the process even starts. Some useful strategies include having incentives for staff to attend face-to-face meetings to disclose their innovations, or linking the innovations to performance or funding, and formalising recognition and celebration of inventions and inventors. There should also be clear guidelines for record keeping, particularly in an innovative environment such as resources.
Ideally, a business should ask itself at the earliest possible stage the following questions. The answers will assist the business in determining how to strategically use and manage its IP.
It is paramount to properly identify inventors and clearly demarcate who will own what IP generated by the business. For instance, what is the relationship of the inventors to the business and how does this relationship effect the ownership of IP? Alternatively, is a collaborative relationship being considered? If so, who is bringing what to the collaboration? Written agreements with all staff and researchers, including contractors and collaborative partners, are a must.
What are the short- and long-term business plans?
What has been or is about to be published? Is the invention or research novel? If so, then consider patenting.
Freedom to operate
Is a completely new product or process being used or contemplated? If so, are you free to exploit the technology without infringing other IP rights?
How is the research to be funded? Is capital raising required? Are there tax or government funding options that may be exploited?
Intellectual property management practices and policies
It is important for the business to have written agreements with all staff and researchers, including written agreements with contractors and collaborative partners. It is also important to undertake novelty or infringement searches before embarking upon research, otherwise there is a real risk that researchers will ‘reinvent the wheel’ or are impeded from taking newly-developed products to market.
It is also preferable to monitor your competitor’s IP, not only to ascertain what IP may block you, but to also to provide market intelligence in advance of commercial exploitation. There are a multitude of publicly-available databases that can be searched, either by the researchers or via a professional searcher.
A strong IP strategy is the key to a successful business strategy, especially in the resources sector where innovation has historically provided key competitive advantages. By retaining experienced counsel and developing a robust IP strategy, a business can avoid, or at least manage, many expensive pitfalls and add real value into an organisation.
This article is intended to provide a brief overview of general IP considerations and should not be regarded in any way as an exhaustive treatise on IP law. There is no substitute for detailed advice from a Patent and Trademark Attorney aware of the relevant facts and experienced in this specialised field. If you have any questions or require any further information or clarification, please do not hesitate to contact Shelston IP.