Companies often put too much faith in patents alone to protect their intellectual property (IP) when manufacturing and selling overseas. But a one-size-fits-all approach to IP protection rarely works. Though patents have benefits in some cases, they are frequently not the most effective or economical choice. A wiser strategy involves exploring multiple IP protections and crafting a plan tailored to your specific business needs. It’s not about having “a” protection, it’s about having the “right” protection.
The Trouble with Patents
At least once a week, one of my law firm’s international IP lawyers will get an email from a company that has just spent a large sum securing a patent and wants to know whether “any other” IP protections are needed before manufacturing the product overseas.
I recently spoke with a company that told me that it had already spent $17,000 on an NNN Agreement, a patent, and a copyright, and it was “certain our IP is completely covered.” My law firm’s international IP attorneys looked at what they had done and quickly determined that their NNN Agreement was worthless, their patent was essentially in the wrong country, and their copyright made no sense at all and was entirely unnecessary. I was shocked to learn that it had no trademark protection in the country in which it was doing its manufacturing, even though this was by far the most valuable protection it could have based on its product and its markets. In other words, it had achieved very little IP protection for its $17,000 and it could have had considerably more protection for around 90 percent less.
Though patents provide strong protection in theory, securing and enforcing them has major downsides that many fail to consider:
- Patents are expensive. They typically cost around $10,000 per patent, per country. For a company with a global presence, these costs quickly add up.
- Enforcing patents is costly. Many companies are shocked to learn how much litigation will cost after already investing in the patent itself.
- Patent protection is geographically limited. A US patent provides no protection in China, for example.
- Proving patent infringement can be difficult and usually requires hiring expensive experts, even in seemingly clear-cut cases. Infringers often claim minor technical differences to avoid penalties.
- Getting infringing products removed from e-commerce sites usually requires a court order, which is invariably difficult, time-consuming, and expensive to obtain.
Securing a patent doesn’t guarantee its enforceability or its ability to prevent copying, especially overseas. Though patents make sense for truly novel inventions or certain industries, they are too often obtained without first analyzing the costs and alternatives.
Other IP Protection Options
Rather than default
to patents, companies should take a strategic approach and consider the full range of IP protections at their disposal. Some alternatives provide comparable protection at lower cost. Sometimes any one of the below can be better and cheaper than a patent:
– Trade Secret Agreements prevent confidential information like manufacturing processes from being leaked. This is protected through non-disclosure agreements with employees and partners. Many countries protect trade secrets without an agreement.
– Manufacturing and supply agreements can be used prevent partners from appropriating or copying intellectual property.
– NNN Agreements can be used with just about every person or company to which you might reveal confidential information.
– Mold and Tooling Ownership and usage agreements often make sense with any company that will be making your product.
– Product Development Agreements with any company with whom you work on developing or refining your product.
– Non-Compete Agreements with your employees, suppliers, vendors, and others.
– Copyright protection arises automatically and is usually inexpensive to register. It prevents direct copying of written material, images, videos, software code, and other creative works.
– Trademarks protect brand names, logos, slogans, and other distinctive elements. Securing trademarks typically costs about 1/5 as much as registering patents.
– Trade dress covers the total visual appearance of a product, including unique packaging and design elements. In some countries, it can be registered as a trademark.
– Design patents protect the ornamental design of a product. They are relatively affordable and useful for stylistic innovations.
– Monitoring online platforms (Amazon, Alibaba, etc.) and sending cease and desist letters can stop infringement early, without needing litigation. See Protecting YOUR Intellectual Property From Alibaba and Other Chinese E-Commerce Sites.
– Sending take down and cease-and-desist letters to stop the selling of counterfeit or infringing products.
– IP Litigation may be warranted after weighing the unique costs and benefits.
– Administrative actions make sense in many countries.
– Police assistance.
A balanced IP strategy utilizes multiple protections tailored to your specific product, brand, processes, and partners. No single option is a silver bullet. The best approach depends on your business priorities, geographies, budget, and tolerance for enforcement costs.
There is a vast array of tools in the IP protection arsenal, and the most effective ones vary depending on the specific needs of your business. The best ones for your business are the best ones for your business and the last thing you should do is focus on just one thing, like a patent.
Craft a Custom IP Protection Strategy
Before you spend money on IP registration or IP protection agreements, I suggest you do at least some of the following:
– Catalog your intellectual property. This might include your product designs, your brand names, your logos, your inventions, your source code, your client lists. Many companies aren’t even fully aware of the IP assets they possess.
– Analyze which IP protections best fit your priorities and budget.
– Determine what IP registrations you already have and figure out what might be missing. If you are doing a lot of business in five countries but have trademarks in four countries, that’s a tip-off that something is likely wrong. If you have a trademark on one of your brands that generates $300,000 in yearly revenue and not on one of your brands that generates $3 million in yearly revenue, that’s a tip-off that something is likely wrong.
– Analyze your confidentiality and supply chain agreements to determine whether they are contractually protecting your IP.
– Develop enforcement plans tailored to your risk tolerance and your global footprint.
– Set up a plan for monitoring for potential IP infringement and take prompt action. In many countries, failing to act promptly against IP infringers may make it impossible to act against any IP infringers later on.
– Ensure that your IP strategy evolves along with your business over time. Be proactive and strategic for the long-term strength of your business.
Many companies can do the above without outside help.
A one-size-fits-all approach to IP protection doesn’t cut it. Every country, every industry, every company, and every product requires a bespoke strategy. Relying solely on patents or any single form of IP protection can be a costly oversight. Assess your IP assets, markets, and objectives holistically, and craft a tailored your IP protection strategy accordingly.