Get off my property!

13 Apr 2006

“Intellectual property (IP) doesn’t exist within a vacuum; it exists within a commercial context.” If Kevin Burke, a technology transfer executive in Enterprise Ireland (EI), had to offer one piece of advice for technology start-ups, this would probably be it.

“One of the problems with IP is that just one in 10 patents or thereabouts ends up in a commercial product on the market,” he remarks. “So it’s critical that at the beginning a lot of thought goes into the commercialisation prospects of IP, so that you’re not wasting money by filing needlessly. Secondly, patents that are filed should be drafted with a commercial context in mind so that you include all of the likely potential commercial applications of the IP.”

EI offers IP expertise to both university research teams looking to commercialise their research and to established SMEs. In the university sector, the objective is to look at the various ways in which IP can be commercialised, from creating a start-up firm to licensing out the technology to an SME or a multinational. Services to SMEs include helping them find new technologies they can license in and fleshing out their IP strategy.

While some sectors such as ICT and biotechnology are familiar with the issues regarding IP, a number of others are not, so part of EI’s job is creating a greater awareness of IP issues among sectors such as food and engineering. To support this work, EI operates a fund — the Intellectual Property Assistance Scheme — that assists companies with some of the cost of filing patents and offers advice on the patentability of the technology.

The importance of patent protection to the ultimate success of a technology firm cannot be overstated, believes Michele Quinn, director of the Irish Software Association. “Patents provide incentives for companies to undertake research and development [R&D]. No company, large or small, will invest heavily in research and innovation unless it knows it can protect the results of that investment. Patents are vital for Ireland to develop its software industry and to provide an incentive for companies to invest in research and innovation.”

But protecting your innovation is not a one-size-fits-all affair. As Burke explains, different filing strategies should be deployed depending on the business you’re in and what kind of technologies you have. “Patents are legalised monopoly rights that you file in different territories. So if you’re in the ICT or biotech area, the US is going to be important; if you’re in the food business, maybe South America might be more important, whereas if you’re in neutraceuticals maybe Japan is where you should be filing,” he says.

One lesson that companies gradually learn is that the key to IP protection does not lie in a single mechanism such as patents but in a whole web of them. “The best possible protection is where you combine all of the different elements of IP protection around a technology,” says Burke. “You see companies such as Gillette that have a whole technology IP asset base that’s made up not just of patents but of design marks and trade marks as well so they create a field of exclusivity around them that makes it very difficult for competitors to compete against.”

Irish firms looking to file patents in other countries usually file the patent in Ireland first and then avail of the Patent Cooperation Treaty, which allows them to file patents in multiple territories. This gives them a breather of a few months before they have to go into the nationalisation phase, which means filing patents in each national market. This is where the cost really kicks in because local language translation services are required.

It is important to note that very different standards are applied in Europe and the US when filing patents. In Europe, where ‘first to invent’ criterion is used, the process is far more rigorous and applications are subject to greater vetting. In the US, which applies a ‘first to file’ criterion, much less emphasis is put on the uniqueness of the technology.

As CEO of Dublin-based Aircraft Management Technologies (AMT), Bernard Hensey has had first-hand experience of the different regimes. The company, which was founded in 2000, develops technology for capturing and reporting data between aircraft and central systems. Last year one of its products, Flightman, was installed on 54 Boeing aircraft operated by EasyJet as a part of a six-figure deal between the companies. AMT originally deployed a direct sales model in the US but now goes through local partners instead.

Hensey believes that Irish businesses need to be aware of the completely different IP protection regime that exists in the US. “In hindsight, we should have looked at our IP strategy in the context of how patents are enforced in the US. Everyone patents everything in the US. In Europe you spend money on coming up with a good invention; in the US you spend money protecting it.”

In fact, companies in the US spend hundreds of millions of dollars every year defending patents against alleged infringements. Burke notes that multinationals with deep pockets can play a cynical game where they drag smaller rivals into lengthy and costly court battles over patent ownership. “That can really affect a small company which maybe has limited funding, so companies need to have a strategy for dealing with an infringement if it were to happen.”

He feels that going to court should be a last resort because of the real risk of having your patent invalidated by the court. This applies to both parties in a dispute so it makes sense, Burke argues, to settle the case as early as possible. One of the most common ways of doing this is to sign a cross-licensing agreement. “This is where both parties agree not to sue each other any further and agree to allow each other to use each other’s IP under certain conditions,” he explains.

While licensing agreements are very common, it is an area where Irish firms need to tread with care, says Burke. A common mistake is failing to conduct proper due diligence. For example, they don’t validate the licensor’s right to license the technology in the first place. Another common error is failing to claim any ownership rights over improvements made by the licensee to your technology. “It may be that a major improvement to your technology may be more valuable to you than the original IP,” Burke points out.

He emphasises, however, that so long as a licensing agreement is properly drafted, licensing can be an incredibly effective way for Irish firms to break into the US market. “If you look at it from a cost-benefit point of view, it takes a huge amount of learning to set up a direct sales office in the US whereas if you can license to someone who is already active in that market and knows how it works, why not do so and look for royalties back?”

Burke advises that Irish technology firms doing business in the US should employ the services of a US legal firm early on. Many of these are full-service firms that will handle everything from patent filing right through to drafting licensing agreements. While IP lawyers don’t come cheap, Burke believes it is not an area that should be skimped on. “Mediocre advice is very expensive, especially if you haven’t the right clauses in your contract and the whole thing goes pear-shaped.”

AMT’s Bernard Hensey is fully in agreement. “One of the lessons we’ve learned is that you need good patent attorneys on your side.”

Licensing IP in the US market might be a daunting prospect for many Irish firms but the good news is that several Irish firms have already successfully cut such deals. They include Alimentary Health, an Irish biotech firm that signed a licensing deal with Procter & Gamble, and TCD biotech spinout Opsona, which signed a deal with Wyeth.

Hensey believes that while the US presents huge opportunities to Irish technology firms, they need to enter that market with their eyes open and be more canny about their IP strategy. “You can patent anything in the US. The issue is whether or not you can protect it.”

By Brian Skelly