Exporters need to be aware of the time, finances and will power needed to fight intellectual property thieves who have the potential to bankrupt a business.
BY: VIRGINIA MCMILLAN
Rob Miller knows what it’s like to face an intellectual property threat so severe 20 years’ business success is put at risk.
Miller is managing director of Klipon, the firm that makes and sells the iconic Kiwi clip used on kiwifruit vines throughout New Zealand and internationally.
By the early 2000s, Miller’s copyright and patent protection had expired. When an almost identical copy hit the market, IP law firm James & Wells suggested trademarking the Klipon vine-tie’s swan-neck shape. says Miller: “I’m the first [NZ] person to have got a trademark for a shape, and it cost a small fortune. Now we’ve got that trademark, it can tend to scare people off quickly.”
The shape trademark held up under legal scrutiny to Appeal Court level in a dispute between Miller and a Katikati man with Asian connections who was bringing in copycat ties. “It was the biggest threat we have had,” says Mt Maunganui-based Miller. “It could have wiped us out of business.”
James & Wells partner Ian Finch says an advantage of trademarks is that as long as a company continues to use them, they are perpetually renewable for 10-year terms. “Essentially Klipon is pure IP and, without [the trademark], there would be open slather on copying.”
VALUE OF PROTECTION
The potential brand damage from inferior copies is so great that Miller is in no doubt about the value of IP protection. In the past three years, IP investment has run to $150,000- $200,000.he says: “We keep everything up to date in our IP portfolio.”
At Auckland natural products exporter good health, $20,000- $30,000 is spent each year registering and updating trademarks in the correct categories in every country where the company trades, says CEO Paul O’Brien. “We pay for it, we own it,” he says. “Our agreements with distributors make it clear we own the brand and they have an exclusive territory.”
The name Good Health is broadly descriptive, making it more likely that others will try to use it, and more difficult to defend should it ever end up in court.
But that’s no excuse for the many infringers O’Brien has spotted or been advised of, who use the company’s name, or similar sub-brand names or packaging, to market a product copy cheaply. he says they are often tiny, home-office operations that last no more than a few weeks. A grumpy letter deters many. “We tend to [chase them] ourselves — we make minimal use of lawyers,” says O’Brien. “If it was big, I’d use a lawyer … Offshore, we get our distributors to get them shut down, because they are passionate about their exclusive territory.”
Some exporters find their rights abused by the very people they trust to distribute their product or act for them offshore.
CHASING AN EMPTY SHELL
Nelson-based Ifor Ffowcs-Williams owns and manages a training and development organisation, Cluster Navigators, and works in several European countries. In Finland, he appointed an agent and provided her with materials for courses he was to run with her assistance. He was never paid and she used them to make money herself.
A Finnish court awarded $150,000 in costs to Ffowcs-Williams, but he says the woman’s original company is bankrupt so is unlikely to pay. “I am chasing an empty shell.” the lost income is bad enough but worse, the matter has consumed huge amounts of time and energy. Don’t be too trusting, Ffowcs-Williams advises.
Baldwins partner Rosemary Wallis cautions that before deciding on an associate to work with offshore, exporters must do extensive research, including networking, using NZTE contacts, and talking things through with other traders.
In the event of a breach, AJ Park senior associate Kate Mchaffie says material with a New Zealand copyright (not registered but existing automatically) can be defended in most offshore territories. “You can enforce it but you must decide whether you have the will, the time and the money to do it. I would be lying if I said litigation was either cheap or easy.”
At James & Wells, partner Simon Rowell says an offshore court action is costly and risky – “but it might be just as risky to let [the infringer] destroy your market”.
Exporter magazine talked to one medium-sized company producing numerous design briefs for offshore tender bids on a daily basis, often for areas it sees as high risk, such as the United States, China and the Middle East.
Major technology is patented but individual briefs, despite the risk, carry no registered protection. It’s a business cost and time decision.
Leaked briefs sometimes end up in rival hands but the company feels it has more productive things to do than investigate them. Mchaffie suggests at least creating agreements that cover IP, with anyone a business deals with. “Make it clear you assert the right so that no one can be in any doubt.”
Wallis says exporters intending to show materials to another party in China or the US would want copyright registration in those countries as back-up. Wherever you are trading, if it is your original written material, “have the copyright symbol reasonably prominently displayed”, she says.
BEWARE OF NATURAL ADAPTERS
In China and other parts of Asia, “natural adapters” aplenty may well look at your ideas, product specs or materials and immediately set about using them. “In some countries, don’t talk to people if you haven’t applied for a trademark, copyright or design registration before you left.” Mchaffie notes that showing a product confidentially to a potential offshore customer may be enough to preclude applying for a patent – which must be novel.
As Wallis points out, exporters are advised to plan well ahead and register in markets where they expect eventually to do business.
When a brand, product or idea is stolen or imitated, Rowell says options include a letter of demand (“cease and desist”) and follow-up negotiation on possible damages or costs to be paid; or filing court proceedings — often, an interim injunction, which can “stop them in their tracks almost immediately”. Most disputes do not go to court, he says.“But you need to have the protection, otherwise you haven’t got the argument.”
