IP INFORMATION

Intellectual Property Rights

Trade Marks

Patents

Registered Designs

Important Issues

Exploiting Intellectual Property

INTELLECTUAL PROPERTY RIGHTS (back to top)

IP rights are considered to be one of the highly valued aspects of a business, and sometimes seen to be critical to the success of an enterprise. It is not uncommon for a business to secure a variety of registered IP rights over a product. For example, dual design and patent protection can be obtained for different innovations associated with the product, along with the creation of a striking brand and slick packaging.
The most common types of IP rights are summarised as follows:

TRADE MARKS (back to top)

A trade mark is any distinctive sign used to market goods and services.
Elements incorporated in trade marks commonly include words, letters, slogans, symbols, pictures, and logos. Further, shapes, sounds or smells that can be represented graphically can be considered registrable trade marks.
Trade mark rights can arise by use and by registration. It is possible to obtain limited protection of your trade mark rights by using or establishing a reputation in the mark in relation to the particular goods and services to which the mark is applied. These rights may take years to obtain and unfortunately could be limited to the geographical region the goods or services are marketed.
Difficulties can arise if a trade mark owner wishes to expand and franchise a business, and extend the geographical region for marketing the trade mark only to find that they can not use the brand in another region by reason of another trader having trade marks rights to the same or similar mark. For these reasons and more, businesses usually rely on registered trade mark rights.

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Registered Trade Marks

Registered trade marks are stronger than unregistered trade mark rights, and can offer the following advantages:

• Registration makes it easier to prove ownership of a trade mark.
• Registration confers a monopoly in the trade mark that can be used to stop the same or a similar trade mark from being used for the same or similar goods and services. This means that protection of the mark can be wider than for an unregistered trade mark.
• Registration provides a property right that can be sold or licensed.
• Registration confers a right to sue for infringement without the need to prove that a reputation exists in the trade mark.
• Rights accrue immediately on filing an application for registration, even when the mark is not being used or marketed. This means a trade mark can be secured before committing resources to market the product or service to which the mark is to be applied.
• The exclusive right to a trade mark can extend to the entire territory of a Country, even if the trade mark is only used or marketed in a small region.
• The existence of an application or registration on the trade marks register provides notice to other traders of a claim to ownership in the mark. This register warning of a claim to ownership offers a deterrent value to registered owners as trade marks on the register are easily searched by businesses considering using the same or similar mark.
• Overseas markets can be protected for a limited period of time after filing on the basis of the application for registration in New Zealand.
• Enforcing registered trade mark rights is more effective and certain, and is generally less expensive, than relying on unregistered rights.

Choosing a Trade Mark

Not all trade marks or brand names are registrable. Trade Marks that are commonly used in an industry, or are completely descriptive of the goods and services, will be rejected by a Trade Mark Examiner during examination of an application.
This risk can make choosing a brand name for a product or service a difficult task. However, selecting a suitable trade mark before committing resources on packaging and marketing the new brand is a good idea.
Successfully avoiding conflict with competitors by conducting a register search should be achieved by following a few guidelines.
The first step is to select a trade mark that has the potential to attract consumers and distinguish your product or services from your competitors. Avoid brands that directly describe a character or quality of the product, such as CHILLY for ice packs or SPARKLE for aerated waters. These types of trade marks are not considered registrable trade marks as businesses can freely use words that directly describe their products.
Invented words such as KODAK® for cameras and FORMICA® for kitchen and bathroom joinery make excellent brand names. Words that have a dictionary definition but don’t refer to an aspect of the product are also suitable as trade marks. For example, CAT for clothing or TIGER for mountain bikes.
Words that indirectly refer to the product may result in a distinctive brand such as GREENFINGERS for a range of garden gloves.
The selection of a creative trade mark to distinguish your products and services may just be that extra X factor that assists your business with achieving a competitive edge in the marketplace. Once a trade mark is chosen, the next step in the process is to check that no one else is using the same or similar mark before you adopt it. A trade mark search is advisable to confirm that no conflicting marks exist.
When the results of searches are favourable, you could be in a position to protect your new brand with a trade mark application, and begin marketing your products and services.

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Procedure for Registration

An application for registration must clearly define the monopoly rights sought in the trade mark.
The trade mark register is divided into classes of different goods or services. Each application is for at least one class. The step of selecting the most appropriate class or classes to fully protect a trade mark is a complex one and we recommend you seek our advice for this task.
If coverage is not adequate a trade mark might not be infringed as infringement only occurs when a competitor uses the same or similar mark on the same or similar goods or services. If all the relevant classes are not covered there may not be any infringement of registered rights.
We would be happy to discuss the most suitable classes for your trade mark to ensure the best protection is obtained for registrable trade marks.
It is important not to overly limit the goods or services as it may well be that an applicant’s product range is expanded over time. For example, class 25 covers clothing, footwear and headgear. If the application is restricted to T-shirts in class 25, and the mark is later applied to baseball caps or shoes, the registration may not cover such goods.
Once the application is filed it will be examined by the Intellectual Property Office. The examiner will check the application and search the register to determine whether any conflicting marks exist. If there are any objections to registrability, an examination report will issue, and the applicant is given a period of time to respond to such objections.
When objections are overcome the application is accepted and advertised in the Intellectual Property Office journal. A statutory period of three months is then applied allowing anyone to oppose registration, and if there is no opposition raised, the trade mark is registered. A Certificate of Registration will issue at the end of the process.
The registration will be current for ten years, and can be renewed for consecutive periods of 10 years provided renewal fees are paid.

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Protection Internationally

A trade mark can be registered in countries overseas provided the mark is available for use and registration in a particular country.
A search may be conducted before filing overseas as a trade mark may be available for registration in one country but not in another. Ensuring that the mark is available overseas is recommended given that considerable resources may be invested in branding programmes, and if a conflict exists in an overseas market, considerable expense may be incurred to settle a dispute and re-brand a product or service. We can manage trade mark searches and advise your business, if required.
If a New Zealand trade mark has been filed, an overseas application can be filed within six months to claim the earlier filing date of the New Zealand filing. Even when the six month period has passed an overseas application may still be filed. However, the earlier date can not be relied on and the actual date of filing the application is applied.

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PATENTS (back to top)

A patent protects new ideas and creative innovations embodied in inventions. A patent confers a monopoly over the invention for a limited period of time, usually 20 years. The patent grants the patentee the exclusive right to market the invention in the country that the patent issued. This right means that a patentee can stop others from importing and exporting, manufacturing, and selling the patented product or applying the process in the country of the patent unless a license or permission in some form is given.

Patentable inventions include new technologies, and improvements and modifications of existing products and processes. The various fields of technology for new products and processes are not exhaustive and broadly include:

• Electrical and electronic engineering, including computer software
• Mechanical and civil/structural engineering
• Chemical engineering and process technology
• Biotechnology

The types of inventions that can be protected by a patent are generally only limited by the imagination of inventors. We can assess the merits of any invention and advise on options with protecting your invention.

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Searches

Searching patent registers is recommended before committing resources to protect and exploit intellectual property, or for any business importing products into New Zealand.
The primary reason for conducting a search is to ensure that manufacturing or marketing a product will not infringe any current patents.
A further reason for a patent search is to determine whether your invention is patentable. That is, to assess whether the invention or any aspect of it can be considered new and inventive in light of the results of the search. A search may result in obtaining information on similar subject matter that will determine the extent of monopoly protection available in the invention.
An overseas search may be prudent if you are considering exporting products to a valued market or wish to secure protection for your product overseas.
Although searches are provide a good indication of patentability, they are not definitive and are subject to certain inherent limitations. Searches do not cover unpublished patent applications and the accuracy of a search is dependent on the accuracy of the database of records searched as provided by patent offices. Nevertheless, we recommend that a basic search is conducted before a patent application is filed.
Searches can also be used to determine the state of the art, and monitor new technologies being developed and protected by competitors. A business may find it useful to evaluate new technological developments by competitors. State of the art searches can also be useful to identify potential competitors or licensees. For example, car manufacturers commonly review patents obtained by competitors to keep abreast of the research and development being conducted in that industry.

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Patent Filing

If you have an idea or innovation you wish to protect with a patent, you may find it useful to consider the following steps involved with obtaining a patent New Zealand.
A patent application is usually filed with a provisional specification. A provisional specification is a document broadly describing the invention, and usually includes drawings, flow charts or chemical formulae where appropriate. Although this document does not contain patent claims it must describe all aspects of the invention that the inventor wishes to protect.
As the statutory requirements for a provisional specification are not as strict as for a complete specification, it is an opportunity to apply a broad-brush approach to describing the invention. Although the invention should be described fully and in a non-limiting way, the document can describe and cover any improvements and modifications that are envisaged. That way, a broad coverage of the invention is possible and the need to file a further application covering such improvements and modifications may be avoided.
The provisional specification establishes a "priority date" for the invention as described. This date is important as it defines the date at which novelty in the invention is assessed. For example, if another patent application for the same invention has a "priority date" after the date of filing your application, you will have first claim to rights in the invention.
The content of the provisional specification is confidential between the Intellectual Property Office and the applicant. Only the title, inventor and applicant details, and the date of filing are on public record and searchable. Only when the application is accepted and published will details of the invention be available to the public.
After the provisional specification is filed with a patent application, the invention can be marketed and published without compromising any patent rights. However, these rights only extend to covering the invention and any variants as described in the patent specification, and if any significant features are not described, they will not be protected and patent rights will be limited to the invention as described. The provisional specification is a complex document that serves a definite purpose, and if you are uncertain whether you have properly and fully covered your invention then we can be contacted for assistance.
Should any significant alterations or modifications be made to the invention it may be necessary to file a supplementary patent application to cover the modifications made to ensure your invention is adequately protected. We can advise you whether further protection or action is required.

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Complete Specification

When a patent application has been filed with a provisional specification, a complete specification must be filed within twelve months to maintain the priority date, or within such further time that may be requested. It is noted that once the complete specification is filed no new subject matter can be added to the description of the invention. Therefore it is important to prepare and file a full description of the invention reflecting the patent protection sought.
A complete specification is a more precise and comprehensive description of the invention and includes a set of claims defining the scope of protection sought for the invention. The monopoly granted by the patent will be determined by the wording of the claims. Therefore the wording must be accurate and properly cover all patentable aspects of the invention.
Unless a complete specification is filed within 12 months, the patent application will become abandoned and will have no further effect. If the time for filing the complete specification arrives and the applicant is not ready to take the invention further, in most cases there are options available. We can advise on options available provided action is taken while the application is still alive.
In some instances it may be acceptable to file a complete specification in the first instance rather than a provisional specification. It can be more cost effective to bypass the need to file a provisional specification. Factors such as the degree of development work completed on the invention, market research and feasibility studies all contribute to the decision as to whether an invention can be first covered by a complete specification.

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Examination

After the complete specification is filed, the application will be examined. An examiner will review the documents in the application to see that everything is in order. The examiner will also conduct a patent search to establish whether or not the invention is new. The search will cover any "prior art" that includes published patent specifications in New Zealand over the 50 years prior to the filing date of the application and published technical documents relating to the subject matter of the invention.
If the examiner finds any documents that relate closely to the invention or wishes to raise an objection against the application, an examination report will issue giving an opportunity to respond to the objections. As we prepare and file applications on behalf of clients we generally review the examiner's concerns and advise how to overcome the objections.
In some instances the main objection is with the scope of patent protection sought and the solution is to restrict the claims to ensure what is claimed is considered new over the patent specifications found by an examiner. If a patent search is conducted before filing it may well be that there will be no objection of this nature. However, given the huge number of published patent specifications available in New Zealand from many overseas countries there is always a risk that an examiner will find a document relating to a product or process that is in the same field of technology as the invention being claimed.

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Acceptance and Opposition

Once the examiner's objections are overcome, the application will be accepted and a summary of the invention will be published in the official Intellectual Property Office journal. Publication of your complete specification serves the purpose of giving notice of the patent monopoly being sought and to give any opportunity for any party who objects to the grant of a patent for the invention to oppose the issuance of a patent. A three month deadline is given to take action, extendable by a further month, if required.
A further significant effect of publication of the invention is that damages awarded in a successful patent infringement action can be ordered from the date of publication. If there is no opposition filed, or the opposition is found to be unsuccessful or is withdrawn, the patent will be sealed and a Deed issued.
The patent will remain in force for a period of 20 years provided renewal fees are paid at the 4th, 7th, 10th and 13th years of the date of the patent. The filing of a complete specification marks the date of the patent.

Protection Internationally

A New Zealand patent covers New Zealand only. If the invention is to be protected outside New Zealand, separate patents must be applied for in each country where a market exists for the invention.
There are a number of options available for protecting an invention overseas. With all the options available, it does not include applying for one patent covering all countries, as there is no such thing as a world patent.
To apply for patent protection in an overseas country there are two main options available. The first option is to file patent applications directly in the countries of interest within the 12 month period allowed by an International Convention and/or to file in any of the four regional patenting systems in place covering areas such as Western Europe, Eastern Europe and two different groupings of African states. The second option is to file a PCT international patent application.

PCT Applications

This option has been most popular with New Zealand businesses since New Zealand became a member of the Patent Cooperation Treaty (PCT) in 1992. This membership has enabled many New Zealand businesses to pursue patents in New Zealand and overseas via this treaty because of the many advantages it offers.
The PCT international application is a single patent application. A major advantage is that a PCT application can cover over 130 countries, including New Zealand. That is, the New Zealand application need not be completed separately, but rather may be included in the PCT application. It is important to note that although an applicant may select or designate all member countries, there is no requirement to file in any of those countries selected when the time is due. An advantage with this process is that an applicant does not need to decide which countries to pursue patents until near the end of the application process.
The time to file a PCT application is generally within 12 months of the first provisional patent application being filed. The PCT international application is accompanied by a complete specification, which includes a detailed description of the invention, any drawings, and claims defining the scope of monopoly in the invention sought.

PCT Procedure

The process this application undergoes is in accordance with strict time tabling, and the stages of the application are as follows.
At about 16 months an international patent search and Written Opinion is automatically conducted and a report issued by the chosen PCT searching and examining authority. The purpose of the search is to establish whether there are any published patent specifications that describe inventions of a similar subject matter effecting the patent rights sought. The applicant is given an opportunity to amend the claims in view of the search report.
At 18 months the PCT application is published internationally. Details of the invention as described in the specification will be available for any person worldwide to read and consider.
At 19 months most applicants file a request for examination of the application. Examination is requested so that the patentability of the invention as claimed can be assessed. The effect of requesting examination is that it will postpone the deadline for "entering national phase" (i.e. filing individual patent applications) for a further ten months (up to 30 months from the initial New Zealand filing) and allow the opportunity for the applicant to make amendments to the specification and claims that can then be subject to examination.
An examiner will then report on the patentability of the invention as claimed. The report is not binding and is only indicative of the strength of the patent application. One benefit of a favourable examination report is that examiners in the respective Patent Offices where applications are eventually filed will consider the merits of the examination report and may be persuaded by a favourable PCT report.
There is no requirement to respond to either the Written Opinion or the Preliminary Examination Report.
By the 30 month deadline, or such further time that may be available for some countries, an applicant must choose which countries to enter national phase. As the cost of entering national phase varies greatly between countries, please contact us to get an estimate of the costs involved. As mentioned earlier, an applicant is free to choose which countries to enter national phase, and the decision can be left until a few months prior to the deadline.
We note that after the deadline is passed, for most countries it is not possible to obtain patent protection unless special circumstances exist.
After national phase applications are filed, examination by the respective Patent Offices will occur automatically, or in some countries after a request for examination is made.

PCT Advantages

• The cost of patent filings can be delayed by a further 18 months beyond the 12 months otherwise allowed.
• More time is available to investigate the commercial potential of an invention, and have further time for research and development.
• There is a comprehensive search of international patents conducted, the results of which are available about six months after filing the PCT application.
• The PCT application can be filed in English and translation costs deferred for non-English speaking countries until national phase entries are due.
• While the PCT application can cover all member countries, the applicant is still free to pursue patents in any one or more of the countries at the end of the process.
• The patentability of an invention can be tested in a single patent application and suitable amendments made before patent applications in each country are examined by respective Patent Offices. This should result in significant savings as only one application relevant to all countries needs to be examined and corrections made.

PCT Disadvantages

• Official fees payable for filing a PCT application are relatively high and it may only be cost effective to use the PCT process when more than 4 or more countries are covered. If only 2 or 3 overseas countries must be protected, it could be cost effective to file directly in these countries.
• It delays the issuance of a patent as national applications still have to be filed at the end of the PCT process.
• If there is a problem with the PCT application, all may be lost as an "all eggs in one basket" risk exists.
• The PCT system is administratively complicated and bureaucratic so that PCT applications require careful management and this feature may add to the expense.

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Filing Directly Overseas

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REGISTERED DESIGNS (back to top)

A registered design gives the owner a monopoly right to the appearance of an article or object. This does not mean that the design must have any artistic merit. As long as the design appeals to or catches a one’s eye, it will likely be entitled to design protection. The appearance can be in terms of shape and configuration, or pattern and ornamentation, as applied to the article. The article, for example, could be a fashionable-looking bottle, lamp stand or chair that would be considered appealing to users of those objects. Design protection would cover the shape of those articles. Protection for the pattern or ornamentation of an article includes designs such as engravings or a pattern applied to linoleum or wallpaper.
The design protection does not extend to protecting any of the functional features of the article. If the article also embodies a functional innovation, it may be advisable to separately protect the idea with a patent. It is noted that dual patent and design registration covering both the patentable idea and design features is possible. For example, covering the design of a chair having very stylish looking arm rests, seat and legs, and a patent protecting innovative ergonomic features in its construction.

Procedure for Registration

An application includes either drawings or photographs of the design. The drawings or photographs must show all the design features and therefore usually several views of the article are depicted.
An application should also include a statement defining the new design features applied to the article. That way there is no uncertainty as to what aspects of the object or article are being protected.
Once the application is filed it will undergo examination by the Intellectual Property Office. An examiner will at least conduct a search of the register of designs and determine whether the design is new or original. If the examiner is satisfied that the design is new, the protection being sought is clearly defined, and the design features are clearly shown in the photographs or drawings, the application will be accepted.
Unlike patent and trade mark applications, a design application is not subjected to an opposition period. If the application is accepted, a Certificate of Registration will be issued. Details of the design are not published until after registration.
The monopoly protection in a registered design is for a 15 year period provided renewal fees are paid at the 5th and 10th years of the registration.

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Protection Internationally

If international protection is sought then according to an international convention, applications must be filed within 6 months of filing the New Zealand application. This deadline is important when the design has been marketed or articles sold after the filing of the New Zealand application.
The result of filing overseas within 6 months is that the overseas application can claim the date of filing the New Zealand application. Most countries representing New Zealand's export markets are party to this international convention. However, there are some exceptions and we recommend you contact us to discuss the countries of interest before the design is marketed, and we can advise on a suitable design registration programme.

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Advantages of a Registered Design

A registration gives notice to designers and potential copiers that a particular design has been protected by a monopoly right in that design. In this way the registration can be a deterrent to potential copiers.
The details of the design are searchable and therefore details of the forbidden monopoly rights in the design can be searched by competitors who market similar objects or articles to the design protected.
Ownership in the particular design is certain and in the event of copying of the design the owner is likely to more easily obtain an interim injunction retraining the forbidden activity than if the owner relied on copyright protection.
There is no defence to an infringement action for infringing the design registration rights that the infringer did not copy the design. As the design registration is a monopoly right in the country it covers, even innocent parties who may have incidentally designed a very similar article having the same design features as the registered design can be stopped from their activities.
As the process is relatively short and not complicated compared with pursuing patent protection, it is considered by many designers to be a cost-effective form of monopoly right.

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Industrial Copyright

Another form of protection for designs is industrial copyright. Industrial copyright provides protection for designs that have been industrially applied in New Zealand or elsewhere, and includes protection for design drawings, moulds and prototypes.
Unlike patents and designs, copyright subsists automatically upon the creation of a industrially applied work. The design need not be new for copyright to subsist in the work. The main requirement is that the design must be original, and not copied from another work. Industrial copyright gives the copyright owner the exclusive right to reproduce the work, and the right to exclude or prevent anyone else from copying the work. Infringement of industrial copyright occurs if a substantial part of the industrially applied work is reproduced in 3-dimensions.
The term of copyright protection for industrially applied works varies according to the type of work to which the design has been applied. Typically, protection lasts for 16 years from the date on which the design was first commercially applied anywhere in the world. However, the term of industrial copyright may be reduced if the work is subject of a New Zealand patent or design registration which has lapsed. In these circumstances, another party may copy the drawings of the lapsed patent or design registration without infringing copyright.
As independent creation provides a complete defence to copyright infringement, it is not always advisable to rely on copyright protection alone. In addition, in infringement proceedings, copyright owners must prove that they own the copyright. This can be difficult, especially if design sketches, original drawings, models and the like have been discarded. We therefore recommend that a sufficient amount of material showing the development of the design is retained. Other forms of protection such as design registrations or patents should be considered as these forms of protection offer monopoly protection. Please contact us for further advice on design and copyright protection.

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IMPORTANT ISSUES (back to top)

Confidentiality

It is essential that an invention or design is not disclosed to any person until suitable protection is filed. Disclosure is by publishing, demonstrating or displaying, offering for sale or selling a new invention or design. Disclosure prior to filing may reduce the scope of protection that may otherwise be available or simply prevent a valid patent or design registration from being obtained.
This principle reflects that a monopoly given for a period of time for a patent or design registration will only be granted by a Government in return for first disclosing the new idea or design at the time of filing for protection. Otherwise, why should a Government grant a monopoly in an idea or design that has already been provided to the public. There are exceptions to this principle that should be considered. If an idea has been displayed at an exhibition approved by the Commissioner of Patents, the inventor or designer has six months from the first day of the approved exhibition to file an appropriate application.
You can be assured that disclosure of your invention or design to your patent attorney is not going to affect your patent rights as all communications with your attorney are confidential (please refer to the Patent Attorneys section below for more information).
The prior disclosure principle unfortunately does not sit well with a designer or inventor's desire to assess whether the design or invention is commercially viable. In such situations, a confidentiality agreement is advisable and we recommend you seek our advice before disclosing your invention or design in any form to any person. To a limited extent, a confidentiality agreement can be used to avoid public disclosure. We recommend you contact us to assist you with preparing a suitable agreement that can be used when approaching manufacturers, venture capitalists or any one interested in marketing the design or invention.

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Searches

Searching of the patent, design or trade mark registers is recommended before committing resources to protect and exploit intellectual property, or for any business importing products into New Zealand.
There are very good reasons for conducting a search. The primary reason is for infringement purposes. For patents and designs, a search will determine whether manufacturing or marketing a product will infringe any current patents or registered designs. For trade marks, a search will determine whether use of a trade mark in relation to certain goods and/or services will infringe any registered trade marks. Generally, only an identical or similar trade mark registered in a relevant class of goods or services will be infringed if it is considered to be likely to deceive or cause confusion. We are happy to conduct a search and advise you on this important issue.
For patent searches, a further reason for a search is to assess the degree of patentability of an invention. That is, to determine whether the invention or any aspect of it can be considered new in light of the results of the search. A search may result in obtaining information on similar subject matter that will determine the extent of monopoly protection available in the invention.
An overseas search may be prudent if you are considering exporting products to a valued market or wish to secure protection for your product overseas.
A further reason for having searches conducted is to monitor the new technologies being developed and protected by competitors and evaluating such technological developments. For example, car manufacturers commonly review patents obtained by competitors to keep abreast of the research and development being conducted in that industry.

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Registered Patent Attorneys

Only registered patent attorneys are qualified to assist inventors with drafting and filing patent applications, or to represent inventors before the Intellectual Property Office.
Patent attorneys are members of the New Zealand Institute of Patent Attorneys and are bound by a strict code of professional conduct. This code is similar to the code regulating lawyers. Because of these regulations, you can be assured that your patent attorney will keep details of your business ideas confidential.

Intellectual Property Office of NZ

The Intellectual Property Office is the official government body required to administer and maintain the register of patents, trade marks and designs. This organisation functions to ensure that trade mark, design and patent applications comply with statutory requirements.
Public Servants at the Intellectual Property Office are not qualified, and it is not their role, to offer legal advice or specific advice on what protection is available for a given business situation. It is the job of Patent Attorneys to provide such advice as they are qualified and skilled at obtaining the best protection available to applicants and advise on the consequences of any action taken.
The fundamental difference between the work of a patent attorney and a public servant at the Intellectual Property Office is that public servants at IPONZ are trained and skilled at ensuring the registers comply with formalities and patent attorneys are skilled at maximising the intellectual property protection available for their clients.

Risks of Inaction

If you have a new product or design and proceed to market it without protection, you run the risk of infringing someone else's intellectual property rights. This situation can be costly to resolve with defending an infringement action or settling a dispute. Further losses can include the investment in advertising the product and brand promotion, and possibly the adverse affects on business reputation and business relationships.
A danger with not taking action to protect a new and commercially viable product or process is that an idea can be easily copied, particularly if it is easy to reproduce. In the case of importers and exporters, not taking steps to ensure that you are free to market the product in any country could lead to expensive and unwelcome litigation by competitors.
We encourage you to seek our assistance if you have a product you wish to develop. We can advise on whether you are free to market your product and ensure you are aware of the various ways your intellectual property can be protected. We can also point you in the direction of various advisors, including venture capitalists, who can assist in making a success out of your business.

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EXPLOITING INTELLECTUAL PROPERTY (back to top)

Once your intellectual property is secured by way of an application or registration, the next step is with exploiting the rights in the product or innovation.
Exploitation can be achieved in a number of ways. As intellectual property is a form of property right, it can be sold outright. There is usually an assignment document prepared and all rights and entitlements to intellectual property are formally transferred. Additional know-how associated with an invention and all acquired branding and goodwill established in a business can also be assigned.
Alternatively, intellectual property rights can be licensed giving a business the authority to work the invention or use trade marks covering a product, usually in exchange for a monetary payment.
In most commercial situations an inventor will have a clear vision of the application of the idea but will not also have the ability to design a production model of the product, and/or manufacture such products and/or market and distribute products in New Zealand and overseas.
Establishing sound business relationships involving suitably skilled people is essential to the commercial success of intellectual property. It is important that these business relationships are clearly defined to avoid unnecessary disputes over who owns various rights, the limit to the grant of rights, and what happens on termination of the business relationship.
We recommend you seek our advice before becoming involved in business relationships to ensure your rights are fully protected and that you are not giving away more rights than intended. For example, committing to a supply agreement only to realise later that the agreement grants exclusive rights worldwide to the recipient to exploit the inventive products and that no other party is allowed to be supplied products. It may have been the intention to supply products to many distributors worldwide.
As terminating an agreement can be complicated and expensive if not clear to all parties, ensuring that the most suitable business relationships are established is a positive step to successfully exploiting the invention.

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Licensing

A license can involve the grant of intellectual property rights permitting a second party, other than the holder of the patent, to exploit intellectual property. Without a license that second party would be infringing the rights of the patentee.
The grant of rights is normally in exchange for an initial lump sum payment and/or royalties, or other consideration. A royalty is simply a percentage of the revenue from income from the licensed product.
The reason for entering a license agreement is usually so that effective marketing of a product or service can be achieved to the benefit of both the licensor and the licensee. It may be that the licensor owns the intellectual property but does not have any marketing ability, and the licensee has the ability to market the product or service successfully.
The license can take any written form of agreement between the parties. However, it is recommended that professional advice is sought to prepare a suitable agreement between the licensor and licensee to ensure that a workable business arrangement is established. For example, a licensing agreement should at least have a definite term and means of termination, it should be clear what happens at termination, the extent of the grant of rights must be defined, the territory the market covers must be clear, and the obligations of all parties must be understood and outlined in the agreement.
The grant of rights may be in the form of an exclusive, sole or non-exclusive license. The differences between each type of license are vast. A non-exclusive license allows the licensor to grant other licenses which is appropriate in cases where the royalty rates are not large and where it is better to have more than one licensee marketing the licensed product. An exclusive license allows only the licensee to freely market the products, even to the exclusion of the licensor. A sole license allows the licensee and the licensor to market the product or service.
The consideration paid by the licensee to the licensor for the grant of rights can be whatever the parties agree. If a royalty rate is applied it is usually a percentage of the manufactured or wholesale cost of the licensed product. It is common to set the rate at between about 3 and 10% of the manufactured cost of the product.

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Manufacturers

Many products require a manufacturer with the expertise and plant to make the products. A suitable agreement should cover all aspects of the business relationship, govern the limitations imposed by the licensor for the exploitation of the intellectual property and quality controls on the product manufactured.

Distributors

Successfully marketing a licensed product can be separate from the manufacture of the licensed product. In some cases the manufacturer will also be the distributor as many manufacturers have established trade channels and contacts for supplying products.
However, in other cases distributors specialise in marketing products and this reflects that the skills required to sell are product successfully are different from those required to manufacture a quality product. In both instances tailored agreements should be prepared to regulate these business relationships.

Franchising

Franchising is a way of expanding the marketing of a product or service. It is a business arrangement where the owner of a business (franchisor) can expand its business by granting franchising rights for a franchisee to operate a similar business, usually with support from the franchisor. These rights generally include the use of brands and other intellectual property and a business system commonly detailed in manuals.
If a product or service is successfully being marketed in a region and a proven business system for exploiting that product is operating, granting franchising rights may be an effective way of acquiring additional income by aiding a franchisee to operate a similar business elsewhere with the benefit of business goodwill established from the original business.
Well known franchises in New Zealand include McDonalds, Fastway Couriers, KFC Chicken, Dymocks booksellers, and Video Ezy video rental stores. All these franchises involve the exploitation of intellectual property with at least a comprehensive branding portfolio and an effective business system.
In New Zealand these is no specific statutory or legal regime governing franchising. Franchising in New Zealand is subject to broad controls imposed by current consumer protection legislation, as well as the general body of company and contract law.

Joint Ventures

Some inventors struggle to raise venture capital to fund the exploitation of an innovative product and some very promising inventions fail to realise the potential they have due to a lack of funding.
One way of raising capital is to enter a joint venture agreement with someone willing to fund the marketing stage of the business associated with the new product. The extent of obligations, expectations and important issues such as profit sharing between the inventor and the investment partner in the business need to be clearly defined.

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