Intellectual Property

INTRODUCTION

In commerce and business the value of intellectual property assets is growing rapidly and in the not-too-distant future IP will outweigh physical assets such as inventory, real estate leaseholds and plant and equipment in virtually every balance sheet. Indeed, in many balance sheets today intellectual property accounts for more than 70% of a company's value.

The United States Patents and Trade Mark Office has estimated that the nation's IP rights are now worth in excess of US$5 trillion which, even in these troubled times, is double the US Federal budget! Our own Department of Foreign Affairs and Trade estimates that the current value of intellectual property in Australia is over A$30 billion. I would hazard that's quite an under-estimate. A recent PriceWaterhouseCoopers survey estimated that intellectual assets made up about 90% of the value of the world's top 2000 businesses. America's leading companies such as IBM, Microsoft and Google have managed their IP very well but, with some major exceptions such as CSL, Australian companies have been much slower then their overseas counterparts in recognising the importance of intellectual assets.

WHAT IS INTELLECTUAL PROPERTY?

Intellectual property is, as seems obvious, the product of the mind. I like to depict IP as a great sea of light bulbs representing the squillions of ideas that are out there at any one time, the vast majority of which will never have any protection in law.

PROTECTION AND THE PUBLIC

So how can we protect our intellectual property assets? In most legal jurisdictions there are at least four statutory régimes which offer protection, to a greater or less extent in certain specific areas of intellectual property. I like to think of these as life buoys in that sea of light bulbs. The names of these four régimes will be known to most of you, but perhaps how they actually work is lesser known, so I'm going to, briefly, go through them. Before I do so, however, one might ask why should there be statutory protection for any intellectual property? Why, for example, should a life-saving device be protected by patent (eg the HIV vaccine), when it should be available to the world without penalty?

The answer resides in the uneasy balance between the right to exploit one's ideas and the need for the public to make use of it. Without some form of protection, so the argument goes, no-one is going to spend money on research and development because, as soon as they come up with something fantastic, everybody else is going to latch onto the idea. This is why we have some statutory protection of intellectual property, but the form and extent of that protection varies considerably, as we shall see.

THE STATUTORY REGIMES

Patents

I like to start listing the statutory régimes with patents, because they are the most recognisable of all intellectual property. A patent protects the way a product works or its method of manufacture, not the way it looks or how it's configured. Patent protection has become a little less difficult in the last six or seven years with the introduction of what is called an innovation patent. Once granted, a patent gives its owner monopoly protection for a period of 20 years.

Designs

The next form of statutory protection is under the Designs Act which, to some in the creative industries, is something of a misnomer. While it protects some designs, it does not protect many of the things my graphic designer clients come up with, ie. works in two dimensions. The Designs Act is more for the protection of a shape, configuration or decoration of a product rather than the way that product works. For example, I am currently looking at invoking the protection of the Act for a rather unusually-shaped stool, which a client of mine has designed.

Obtaining protection under the Designs Act is far cheaper and easier than under the Patents Act and a registered design also gives its owner monopoly protection for (unlike the Patents Act) continuing ten year terms.

Trade Marks

Our third statutory régime is the Trade Marks Act which protects (as it suggests) marks (or, as referred to in the Act, "signs") used in trade or commerce. A sign can be words or logos (in the nomenclature of the Act "devices"), shapes, sounds or smells, even. Trade marks probably comprise the main régime which your clients and yourselves would come in regular contact with and a knowledge of how trade marks work, how they can be protected and exploited and, just as importantly, how to avoid infringement, should be something of which every practitioner consulting to business and industry should have a general working knowledge.

Copyright

Copyright is our last area of legislative protection and is the one which has caused more than its fair share of problems to my clients.

Copyright is really what it says it is - the right to copy one's work and to prevent other from doing so. Copyright really "mops up" a lot of the other bits and pieces of intellectual property not protected by any other régime. Copyright resides in such things as artistic works, literary works - although they don't have to be of any particular merit - artistic works - the same applies - and musical works.

The differences between the copyright régime in Australia and the other three statutory régimes we have already discussed is the problematic part of it. For patents, designs and trade marks there is an official Register maintained by the Australian government which puts everyone on notice that a particular patent or design or whatever is registered and protected. Because there is a Register for all to see, it is justified (so the argument goes) for the protection granted in those three régimes to be monopoly protection; in other words, ignorance of a particular registration is no defense to an infringement claim.

In all respects, the reverse is true with copyright. There is no copyright register and independent creation of a particular work is a total defense to infringement (although the onus is on the allegedly infringing party to prove that they were not aware of the original work). With some major exceptions, the first owner of copyright is the person who creates the work, but that doesn't apply, for example, to an employee or when working for the Crown - much to the chagrin of many a designer client! Nonetheless, the statutory exclusions can all - even with the Crown - be overcome by written agreement.

Copyright subsists for the life of the author and for 70 years after their death.

The fascinating thing about copyright is that it is ever-divisible. It can be divided geographically, in time or in the media of its intended use and it is open to the owner (who may not be the author) to dictate the terms of that usage.

Problems occur when the parties don't have anything in writing concerning copyright. The Copyright Act says that copyright can only be assigned in writing signed by the author, but that doesn't mean that another party can't make use of somebody else's copyright through an implied licence to use it. The law may imply terms into an arrangement between parties even when there is nothing in writing.

I have spent more time on copyright than the other régimes simply because it is not nearly as "tight" a form of protection as that afforded by the other régimes and, as a result, it's the one area that causes most problems for my clients.

As an adjunct to the copyright régime, performers' rights and certain moral rights of authors have been enshrined in legislation, but a discussion of them is for another time. Further, with the ever-advancing technological revolution, there is now a fifth statutory régime called the Circuit Layouts Act, which provides copyright-like protection for up to ten years for the layout of integrated circuits such as in computer chips.

TRADE SECRETS

So far so good, you say, but what about all those many millions of lightbulbs still "out there" in our sea which are not protected by any of the statutory régimes? All that mass of private, secret, information which, for one reason or another, isn't protectable, or the owner has chosen not to place it in the public domain.

In many, if not most, cases, the starting point in the exploitation of a great idea is its communication to somebody else who might be able to assist in its commercialisation. Can the passing on of this information be protected?

In business life it is very common to see a contractual commitment to confidentiality. It is essential in employment contracts and often seen in contractor and joint venture agreements and any agreement dealing with aspects of intellectual property.

Confidentiality Agreements

So, how binding are confidentiality agreements? The urban myth that they are not worth the paper they're written on is just that - an urban myth, but the problem with any confidentiality agreement can be at least threefold:

• In the enthusiasm of the moment, the information might be disclosed before a contract is signed and the venture does not proceed;
• Third parties, even those closely related to the recipient of the information, are not bound to a confidentiality agreement; and
• There is always the case of a simple theft of the idea by someone who has had access to it and is not party to any contract.
  

Is there any other way, apart from From our point of view the most important of the above is the fact that third parties are not bound to the contract. contract, to protect confidential information and trade secrets?

A number of countries around the world do recognise the need to protect trade secrets, offering remedies for misuse not based on contract law. For example, misappropriation of a trade secret is a tort, or civil wrong, in the US, and in Europe similar protection is offered, but it is based upon the concept of unfair competition. Japan, which has been very slow to react, now provides injunctive relief and damages in regard to various forms of misappropriation of confidential information. Even the People's Republic of China now has similar legislation, although how effective that might be is yet to be seen.

Much of the turnaround in the developing countries has come about because of the US aggressively using its economic power against its trading partners in an attempt to stop piracy of US-derived technology.

TRIPS

This imperative is now enshrined in international trade under what is called the Trade Related Aspects of Intellectual Property Rights Agreement (or TRIPS), which states (in article 39) that member countries shall prevent disclosure of "undisclosed information" in any manner contrary to honest commercial practice. A footnote in the Agreement explains that the latter term means at least conduct such as breach of contract, breach of confidence and inducement to breach, including the acquisition of undisclosed information by third parties who knew or should have known that such acquisition was contrary to honest commercial practice.

Australia is a signatory to the TRIPS Agreement, so, do we have the concept of breach of confidence enshrined in our legislation, like many other countries today?

Breach of Confidence

The answer in short is no, there is no current legislation. The common law has never specifically recognised misappropriation of undisclosed information as a wrong. Having said this, equity will provide a remedy for breach of confidence in some circumstances, on the basis that it is the privilege of any person who possesses information to keep it confidential. To date, Australian lawmakers seem satisfied that the equitable doctrine of breach of confidence is broad enough to satisfy their obligations under the TRIPS Agreement, but that also remains to be seen. The problem is that there is great uncertainty as to the extent to which non-confidants may be liable to an action for breach of confidence, particularly because there is no consensus in our courts as to why a person should be found liable. Some judges regard the jurisdiction as based upon a very broad and indistinct principle of good faith, while others have recognised some proprietary interest in undisclosed information. The latter, of course, would be by far the best position to be in because, if such information was regarded as property, there would never be any need to try and identify a confidential relationship, whether implied or apparent. This is the happy position the US finds itself in, but sadly not Australia.

To give you an idea of just how far some jurisdictions have gone in developing actions of breach of confidence, you'll all recall that, in July 2008, Max Mosley, the president of the Formula One governing body, successfully sued the News of the World for breach of confidence and unauthorised disclosure of personal information, which infringed his right of privacy by publishing articles which accused him of having a "sick Nazi orgy with five hookers". With Mosley's record award of £60,000 damages, actions for breach of confidence in the UK are becoming vehicles of privacy-styled claims, where courts have to look at the balance between one's entitlement to privacy and the public interest in freedom of speech. While privacy per se has little to do with our topic under discussion, the extension of judge-made law like in the Max Mosley case marks a quantum leap in a company's ability to protect secret information with parties who are not confidants or subject to any contract. I predict there will be paradigm shift in the way Australian law deals with confidential information because of the globalisation of our economy and the might of our trading partners, and this is all good news for business and commerce. That means there is going to be quite a few of those seeming unprotected light bulbs out there in our sea which will have life buoys of their own and, through a mixture of statutory and common law principles, a wider array of your clients' intellectual property will be protectable, so long as they know how to do it.

CONCLUSION

It is the responsibility of all professionals to be aware, generally, of what comprises intellectual property and to ensure their clients are also aware and have protocols in place for its exploitation and protection. During my presentation, I will circulate a short-form questionnaire that I have found very helpful to my clients, particularly those who regard intellectual property as some airy-fairy concept reserved for the realm of artists and rock bands! Every corporate or business client you deal with has a brand. It's your job to make sure they are fully aware of what they can do to protect it and every piece of information which is integral to the implementation and running of their businesses, their trade processes, formulae, algorithms and whatever. Where are all these bits of information? How are they protected? Who has access to them? Steven Selby, the director of the Government of Hong Kong Special Administrative Region's Intellectual Property Department has said that the legal profession needs to do a bit of re-engineering to give advice that is more useful to businesses from the very beginning of their creative process. I would add that the accounting profession is just as much required to do so. This re-engineering requires involvement in the conceptualisation, market research, design, prototyping, manufacturing and release to the market of ideas, designs, copyrighted material or patents, as well as at the infringement stage, which is usually the time lawyers become involved! Selby goes on to say that 90% of the time it is only after a product has been developed and marketed that a company thinks about how they should protect their intellectual property. In a word, we can often show our commercial clients how their businesses are worth more than they think.