SUCCESSFUL innovations, be they technological or otherwise, will lead to a larger than usual increment of margin or economic rent, which may in turn finance further investment in innovation. Intellectual property rights exist to reward the original innovator by making it difficult for others to duplicate the intangible aspects of the innovation, thereby sustaining the market advantages of the original innovation.
Strategy dynamics should lead to market differences that can be sustained. However, sustaining the advantage, especially in short life cycle product markets, requires more than simply patents. All the categories of IP rights need to be used in an appropriate, time sequenced manner. The two frameworks that can assist in the decision making process is the IP Atom and the IP Continuum.
The IP Atom Framework
The Intellectual Property management framework, sets up a relationship between the various types of intellectual property (Trade secrets, patents, copyrights, Trademarks etc.) and the management activities that lead to the aforementioned new combinations. This framework, known as the IP Atom, has functional utility at its very core. The rationale behind the purchase of ANY product or service has to do with the fact that it provides the buyer with a measure of economic utility, or function.
Milk, for example, slakes our thirst and or tempers our coffee. Cars provide transportation. iPods provide personalised music experiences. In those cases where the function is unique, patents and/or secrets may be reasonable regimes to hedge against competitive duplication.
To inform customers about the functional uniqueness of offerings, advertising is a form of original expression that envelopes core utility and sends appropriate messages to the target market. Used appropriately, copyright can secure the original aspects of expressions against unauthorised replication by the competition.
The final and outer layer of the IP Atom is the source identifier used to build an identity between the functional uniqueness at the core of an offering and its source in the mind of the target customer. This component of the offering bundle is the domain of trademarks, service marks and trade dress.
Trademarks and trade dress secure the uniqueness of the brand. If advertising by either traditional or non-traditional means builds an equivalence between the functional uniqueness (Patent, Trade secret) and the source (Brand, Mark), then the source identity advantages of the original innovation may be sustained beyond the limited life of the patent or the copyright via the goodwill accrued to the brand.
The IP Atom framework helps illustrate how technology focused SMEs should coordinate with creative and marketing/branding professionals to gain the innovation-sustaining benefits of multiple forms of property. Allocating resources to such an endeavour in a manner that is responsive to market opportunities is the responsibility of IP management.
The IP Continuum Framework
The IP continuum relates the utility or functional strength of a property right (patents, copyright, TM) with the life of that protection. This framework illustrates that as one moves from the patent regime to the trademark regime, the functionality of protection decreases. Patents allow the use of the full breadth and meaning of language to define and claim the distinct and peculiar function of an invention.
Trademarks by statute cannot be functional in the sense that they cannot lead to utilitarian advantages. As a result, the continuum illustrates that the life of the protection regime increases as one traverses from patents or copyrights to trademarks, with trademarks having indefinite life as long as they are properly used and maintained.
As such, the functional strength of the property form is inversely related to the life of the property form. This suggests that patents and copyrights should be used during the earliest stages of market entry. Simultaneously or soon thereafter, equivalence between the patented uniqueness or original expression and the source/brand/mark should be established through focused advertising.
This form of advertising results in a unique selling proposition (USP). If this is done properly, the advantages embodied in the technical innovation (patent, trade secret) or original expression (copyright) now move to the indefinitely long life regime embodied in the brand or trademark. Hence, market advantage is sustained beyond the horizon of limited rights regimes (patent, design or copyright) or the next wave of technological innovation if the SME company is actively innovating.
Why innovation protection is important
Several indicators have been used to measure the efforts of an enterprise in undertaking research and developing innovative ideas. These include expenditure on research and development (R&D), total sales, firm size, skilled work-force, innovation strategies and robust IP regimes, etc. The measurement of innovative activity (and also R&D activity) is often based on patenting statistics.
Patenting: advantages and disadvantages
Patents are the most preferred form of IP rights in relation to technological innovations. The number of patents owned by an enterprise has often been used as one of the main indicators for determining the innovation intensity of that enterprise. In addition, patents are also used as a measure of output of innovation. Patents provide a strong commercial viability for a company to innovate.
Trade secret protection
Trade secrets can consist of inventions or manufacturing processes that do not meet the criteria for patent protection. Wherever innovation concerns a patentable invention, a SME will face a choice to either patent the innovation or to protect it as a trade secret. Trade secrets can be protected without any procedural formalities. The requirements for the protection of trade secrets are the following:
– The information must be secret
– It must have commercial value
– The holder of the information must take reasonable steps to keep the information secret.
Advantages of trade secret protection
– The protection lasts for an indefinite period
– No registration costs (although it may be expensive to keep the information confidential)
– Trade secrets have an immediate effect
– No disclosure is necessary (as opposed to disclosure in filing a patent).
Disadvantages of trade secret protection
– The product or process embodying the trade secret may become subject to reverse engineering
– Once the secret falls into the public domain, everyone may use it
– The enforcement of trade secrets is difficult
– The level of protection is not internationally uniform
– A trade secret can be patented by someone else through independent development.
In conclusion, the ultimate choice between the use of either the trade secret route or the patent route for protecting innovation should be seen as a strategic business decision that should only be made after a careful and due diligence analysis of both the innovation and the market.
Aleck Ncube is an intellectual property scholar based in Bulawayo. He can be contacted on Mobile: +263712374408 Skype: Matintas1 Twitter: @aleckncube Alternative E-mail: [email protected]