What SMME's need to know about IP
Do you have a small business in the form of a small, micro- or medium-sized enterprise (SMME)? Or is it a start-up? Intellectual property law firm, Spoor & Fisher, cautions that there are essential assets at the heart of your business and these should be protected, to defend your competitive edge.
As an SMME, you’ll have a name (a potential trade mark), a logo (a potential trade mark and copyright), a website (with a registrable domain name) and one or more original ideas (a patent/idea that may require non-disclosure agreements).
Intellectual property (IP) entitles you to prevent others from using your creations or intellectual efforts, which set your products and services apart from those of your competitors. So it’s important to understand the significance of IP protection.
The lesser-known unregistered rights
Registered IP rights like patents, registered trade marks, and registered designs are widely familiar, but many businesses are unaware of unregistered IP rights, which vest automatically when something is created, and require no registration.
These could be hugely valuable assets in their own right – especially since many businesses are not in a financial position, at the start, to register these rights.
If this sounds like you, your business could still benefit from managing your unregistered IP rights – like copyright, rights in confidential information (through confidentiality and non-use agreements), and common law trade mark rights.
You see, even where you don’t have registered rights, you may still be entitled to prevent others from riding on the back of your business’ reputation, copying your materials, or otherwise competing unlawfully with you.
Copyright is a form of IP right that protects the expression of your ideas. For example, and relevant to the SMME context, is the copyright that vests in your logo (which is an artistic work), brochures and website (literary and artistic works).
Unlike other forms of intellectual property law, it’s not possible to register your copyright (apart from films) in South Africa. Copyright exists automatically when it complies with certain requirements, i.e. it should be original, in a material form and created by a South African (or a person from a Berne Convention country).
Should the “work” comply with these requirements, you will be able to stop third parties from making reproductions or adaptations of it.
A common mistake that SMMEs make when it comes to copyright is assuming that if they ask a person (the author) to create a copyrighted work for their business, and they pay for it, they will automatically become the owner.
Here is the lesson: If the author does not form part of your business or did not create the copyrighted work in the course and scope of employment by your organisation, the copyright will remain with the author until transferred in writing to you. This is why it is always important to have proper agreements in place with service providers, to manage the copyright that flows from such services.
A trade mark is a logo, name, signature, word, letter, slogan, numeral, shape, configuration, pattern, ornamentation, colour, container for goods or any combination of these that identifies the origin of a product or service.
Trade marks serve to build brand awareness and business goodwill. They can create consumer confidence in a product, by associating the product with a brand that the consumer recognises and trusts.
There are two ways to obtain trade mark protection: You can either register your trade mark with the CIPC or you can rely on your reputation.
By registering your trade mark, you can prevent third parties from making unauthorised use of your trade mark and benefiting unlawfully from your brand equity. But this takes money out of your pocket, which is why some business owners prefer to rely on unregistered rights.
On the other hand, unregistered rights (common law rights) vest in the reputation that your brand has acquired through use. If you are able to show that you have a reputation in your brand, you will be able to stop a third party from making unauthorised use of it. However, enforcing your unregistered rights can become expensive, especially if you are required to approach the High Court for relief.
Not every small or medium-sized business will benefit from building a patent portfolio, but it’s important to consider whether or not to pursue patent protection, especially if your business relies on a product that is easily reverse-engineered.
A patent will allow you to prevent competitors from making, using and selling your invention.
Beware of delays when it comes to applying for patent protection, even if cashflow is tight. This is because an invention will only qualify for patent protection if it is novel and inventive on the “priority date”; i.e. when the first application for a patent is filed.
If you sell or disclose your invention, or use it commercially, before the priority date, you’ll destroy the novelty of your invention and disqualify it for later protection.
You also run the risk that someone else will invent the same invention and either disclose it publicly (destroying novelty so that you can’t apply for a patent) or get patent protection that excludes you from dealing in the invention without infringing their patent.
If you have a great idea or concept that is not patentable, you could protect it by keeping it confidential and only disclosing it subject to the terms of a non-disclosure agreement (NDA). This type of agreement creates contractual obligations on the recipient to keep your idea confidential and to prevent a third party from circumventing you and using your idea without involving you in the process.
Let’s say you have a great concept for a product that is not patented. You approach a big manufacturer to produce the product for you but you disclose the concept to them without an NDA in place. Three months later the company manufactures and sells a product based on your concept and you’re not included. You have no legal rights to stop them.
The bottom line
Whether registered or unregistered, IP rights are valuable business assets. This is why we recommend that you take steps to protect, manage and enforce your IP.
At Spoor & Fisher, we also encourage SMMEs to chat to us about brand-building; IP ownership and assignment; technical development arrangements; supply and distribution arrangements; confidentiality, privacy and access to personal information; licensing, including franchising; and exchange control compliance.
This article was first published in Engineering News.