Trolls and Your Intellectual Property


The Origin of Trolls

Trolls first make an appearance in old Norse mythology and poetry dating from around the 9th Century[1].  They are depicted as mythical creatures who live in a family group and by and large stick to themselves.  Trolls in this first form are often cast as mountain dwellers or ghosts and are known for being shambling and stupid.

Over time the representation of trolls in literature evolved and trolls began to interact more with the human world around them.  Trolls are now often a trope for trickery in fiction – doing their best to outwit the humans they encounter.

Perhaps the most well-known troll is the one that lives under the bridge in the story of The Three Billy Goats Gruff[2].  In this fairy tale we follow the trials of a group of three goats trying to cross a bridge to greener pastures.

The first and smallest goat is challenged by a troll living under the bridge who threatens to eat him.  The goat escapes by assuring the troll that larger and meatier goats are following soon.  The second goat soon follows, and escapes using the same argument: “don’t eat me, the next goat is much bigger!”.

The troll’s greed for a bigger meal means the first small goat and second middle-sized goat are allowed to pass. 

The third and largest goat now arrives and is stopped by the troll who intends to make a well-deserved meal of this goat.  In a move unanticipated by the troll, the billy goat presents its horns and goes on the attack. 

Having butted the troll off the bridge, the goat continues to the rich fields beyond to live happily ever after, leaving the troll bruised and just as hungry as ever.

We wonder: what lessons can the intellectual property rights owner learn from The Three Billy Goats Gruff?

The IP Troll

First, we need to re-define the troll for the world of intellectual property (IP).

The IP troll comes in a variety of guises:

  • The trade mark troll is known to register trade marks without ever intending to use the trade mark for themselves.  This troll then sues other genuine businesses who use its trade mark.  The trade mark troll is also found in first-to-file countries like China and Taiwan. These specialised trade mark trolls take the opportunity to register trade marks well known in other markets before the genuine owner can take that step.  The genuine owner then finds they cannot use their trade mark in troll’s countries without payment of an exorbitant fee to the trade mark troll.
  • The patent troll focusses on its patent rights in inventions that are often incorporated into products or means of making products.  The patent troll will secure patent rights and then wait until its patent is used by other traders.  The troll then seeks to enforce its patent rights by suing for far beyond the patent’s actual value.  The patent troll can seek damages for years of patent infringement by waiting until the timing is right to sue traders who have built up a business oblivious to the fact someone else holds patent rights for key technological elements.
  • The copyright troll tries to enforce copyrights it owns purely for the purposes of making money through litigation.  The copyright troll is particularly tricky as the IP rights it claims are often not registered and cannot be searched.  Copyright exists as a right in artistic and literary works.  Often those works can be accessed from online platforms and are used by other traders for their businesses. The copyright troll is known to be opportunistic and will sit on its rights without any intention to sell them.  Instead, the copyright troll waits until the copyright work is used and then aggressively sues for infringement. 

What’s so Bad About the IP Troll?

An IP troll impedes innovation and progress by limiting expansion opportunities for genuine businesses and tying up time and resources in litigation.

As a general rule, registered IP rights are meant to provide commercial entities with protection for elements, such as trade marks or inventions, so that the owner can operate a business with the security of exclusivity in these elements. 

Registered IP rights which are not used in connection with a business, and which have been secured with no intention that they will ever be used in connection with a business, clutter the register.  These unused registered IP rights offer no benefit for anyone other than the IP troll who is occupying a space purely to keep other traders out.

How to Build a Bridge to IP Success and Defeat the IP Trolls

Step One: Know your enemy!

The IP troll’s power comes from invisibility until you are challenged with its rights.   

The best way to know whether an IP troll could be in your future is to conduct proper searching of relevant IP Registers.  A search will let you identify what relevant rights already exist.  Being able to plan your path knowing what rights are already established will allow you to avoid trouble.

Found IP rights that might be an issue?  What next?

Step Two: Decide what sort of approach would work for you.

Risk Avoidance (aka – the smallest goat) – Finding registered rights that cross over what you want to do also provides a good idea of the scope of rights to avoid in order to minimise the risk of objection.  Changing focus to something outside of the scope of existing registered IP rights, or making an effort to design around what is already registered, may allow a trader to avoid attack entirely by simply not being in the IP troll’s path.

Risk Management (aka- the middle-sized goat) – Having found potentially conflicting register rights, there is also the option of taking steps to mitigate risk rather than avoid it entirely.  Tools to consider early in a business plan to mitigate risk could include setting up defences in anticipation of objection or investigating licencing schemes with the registered owner.  It may be that a bit of money early in the business on proactive negotiating an agreement will mean that you will end up on the right side of the IP bridge, and not a meal for the IP troll.

Going on the Attack (aka – the biggest billy goat gruff) – For the aggressive, finding registered IP rights in the hands of what looks like IP troll may result in a call to arms.  If you are committed to your business path, you can always take the IP troll head on.  In many countries you can take action to remove trade marks for non-use, or file for invalidation of trade marks or patents.  If the IP troll no longer holds any rights, then it cannot impede your progress.

Step Three: Don’t forget your own original ideas and unregistered rights.

It is important to investigate and understand the scope of your own rights and ideas early on in a business in order to plan for the future.

Copyright exists in original works and is typically owned by the creator of those works, or the party who has commissioned it.  If you have created your own original work, then a claim to copyright infringement should not succeed.

What to Take Home about IP Trolls

A unifying feature of the IP trolls is ownership of IP rights with the intention to aggressively attacking other traders. 

The IP troll makes money by holding what it owns to ransom.

Defeating the IP troll starts with originality and diligence.  By being true to your own business path, creating and understanding your own IP, and most importantly checking your path is free to follow, IP trolls can be defeated and you can cross the bridge to IP success.

Need help with IP trolls?  Contact us today.

[1] Old Norse poem Skáldskaparmál dating from the 9th Century records a conversation between troll and poet Bragi Boddason.

[2]  Attributed to a collection by Peter Christen Asbjørnsen and Jørgen Moe first published between 1841 and 1844.

The Risky Business of Copying Established Traders’ IP

As COVID-19 continues to affect economies around the world, an increasing number of individuals are trying their luck as business owners.

For the new business owner, or one expanding into a previously unknown area, reviewing what works for other traders can be a natural first step. But creating a business that imitates too closely the look, feel and trade marks of an already established trader can lead to problems – even if that other trader is not operating in your market.

Copyright and the 10% Myth

Copyright is an inherent right that covers original artistic works, including but not limited to logos, trade marks, photographs, images and in some cases product design.

The most obvious form of infringement is making a direct copy of someone else’s logo, but you need to be aware that there is still risk associated in copying any part of an original work.

There is no hard-and-fast rule that sets out how much of a copy is too much.  For example, there is no rule that says a 10% difference is enough to escape copyright infringement.  Each potential copyright infringement is assessed by looking at the original work, the extent of copy, and any link between the original and the copy.

Not being in the same country is also not a defence to copyright infringement.

Countries that are members of the Berne Convention[1] recognise copyright across borders.  By virtue of the Berne Convention, if you copy a logo originating from one country and use it in another country, you may still be infringing.

Fair Trading Breaches may arise even when the trader is not physically in your market

The absence of a first trader’s bricks-and-mortar store in your location does not necessarily mean that you are free to use that trader’s look and feel.

Even without sales in your local market, that first trader could establish a reputation with your local consumers through advertising or a reputation overseas.  If those consumers are likely to be confused or deceived by your activities, you could be at risk of breach of fair trading legislation and/or liable under the tort of passing off[2].

Registering Company and Domain Names

Incorporating trade marks which you do not own into your company name or domain name is another risky action.

Company and domain name registrars do not review trade mark rights as part of their compliance work.  Successful registration does not necessarily mean that you are free to use that company name or domain name.

If your company name or domain name incorporates another trader’s trade mark, you could face legal action for trade mark infringement, breaches of fair trading legislation or for passing off.

If your domain name includes another trader’s trade mark, the domain name could be subject to domain name retrieval processes.

Having to resolve an objection to your company name or domain registration can tie up valuable time and resource better spent establishing a business.

Trade Mark Rights and True Ownership

Like many countries around the world, the New Zealand Trade Marks Act provides that the applicant for trade mark registration must be the owner of the trade mark.

If you apply to register in entirety a first trader’s trade mark, or a trade mark which incorporates the first trader’s trade mark, you may face an opposition to registration by that first trader.  If the first trader can show it owns the trade mark, be it through copyright or earlier use overseas, it could prevent your own application progressing.

Even if you successfully register the trade mark, the resulting registration could be immediately vulnerable to attack by the first trader on the grounds that you are not and will never be the proper owner of the trade mark [3].

Trade marks can be an enormously valuable business asset, and an inability to secure valid registered trade marks can greatly affect the worth of your business in the future.

David v Goliath is not about the size of the business, it’s all about the right

Being a small business, or family owned, a young entrepreneur, or starting with a really compelling back-story does not give you an inherent right to copy the look and feel of an overseas business, without permission.  However, a small new business does not need to roll over simply because someone with more money than you objects to what you are doing.

The narrative of David v Goliath is often recalled as shorthand for a small trader winning out over a large trader.  But the story is not one about the differences in size for size’s sake, but about how to level the playing field for the smaller player by ensuring they have right on their side, the correct weapons in hand, and the best focus and aim.

Your business will be in the best position if you are original, have the right intellectual property free from any claim by other traders, registered in the best way, and targeted to maximise business advantage.

Be inspired but be original

The safest way to start a new venture is to make it your own as much as possible.  Taking inspiration is great, but developing original trade marks, look and feel can be the key to long-term success.

It is imperative, therefore, that you get the right advice so that you are aware of the rules, any limitations to what you can do and the best way to make your intellectual property work for your business.

[1] Berne Convention for the Protection of Literary and Artistic Works – 179 signatory country as of March 2021

[2] Muzz Buzz Franchising Pty Limited v JB Holdings (2010) Limited [2013] NZHC 159 at paragraphs 74 – 74 discusses the globalisation of the marketplace and a reputation for an Australian-based business recognised by New Zealand consumers.

[3] The North Face Apparel Corp v Sanyang Industry Co Ltd [2014] NZCA 398 at para 17 “A person cannot claim to be the owner of the mark if another person has previously used that mark  … as a trade mark and the use was public”.

Revocation for Non-Use: Not for Busybodies

New Zealand does not have any requirement for the owners of trade mark registrations to prove continued use.  As a result, many trade marks remain on the Register without being used, and can present a hurdle to incoming businesses.  Filing an application for revocation on the basis of non-use is one of the simplest ways to remove a trade mark from the Register where it has fallen into disuse. 

But the apparent ease of filing an application for revocation can be deceptive.  There are a few crucial points to consider when deciding if a revocation action is the right option for you, and if it will achieve the outcome you desire.

Consider Bob:  Bob is interested in using a trade mark, but has found that it is already on the Register.  Bob can’t see that the trade mark is in use and wants to know what he can do so that he can register the trade mark for his business.

The Effect and Date of Successful Revocation

First, and most importantly, Bob needs to identify his desired outcome from a whole-business perspective.  Bob should be sure that a successful revocation for non-use action will give him what he needs for his business to progress.

If a registration has been raised as a citation and is only partially vulnerable to removal – that is, is in use for some goods but not all goods covered by the registration – removing the directly overlapping goods in a revocation action can seem a simple answer.  But the Intellectual Property Office will still consider any remaining goods and assess if they are sufficiently similar that confusion is likely.  

Partial removal may not mean that Bob’s application will progress.

The date on which a registration will be revoked is also important.  When a trade mark is revoked, it ceases to have effect as a registered trade mark from the nominated date of revocation.  Many revocation actions nominate a date three years before the application for revocation is lodged as the effective date for revocation.

But if Bob has been using the trade mark before than this three year date there a risk that Bob could be sued for infringement for that earlier use during the period where the revoked trade mark is in force.  The case of Ziploc[1] also raises a potential problem regarding ownership.  If the registration remains in force on the filing date for Bob’s trade mark application, no matter for how brief a time, Bob could find his ownership of the trade mark is under attack on the grounds that at the time of filing, he was not the true owner.

A careful consideration of the similarity of trade marks, the potential overlap in market and the risk of infringement is necessary when nominating the effective date for revocation to minimise the risk of other challenges after the revocation action has concluded. 

Having established that Bob has a date for revocation in mind, the next hurdle – has Bob got the right standing to apply for revocation?

Aggrieved Party

Section 65(1) of the Trade Marks Act states that “an aggrieved person” may apply for revocation.  Traditionally, the benchmark for who counts as an aggrieved party has been relatively low.  As confirmed over years of case law, if Bob is likely to face a real legal or practical impact on his business through continuance of a trade mark registration – be it potential impediments to use, or a citation holding up a trade mark application – then Bob is likely to be aggrieved.

The recent decision of Nitro AG v Nitro Circus[2] usefully goes one step further to confirm that the liberal interpretation of the term “aggrieved person” means that the existence of a registration as one of a number of hurdles is sufficient – there is no need for the registration under attack to be the crucial and only impediment facing the applicant.

The bottom line to achieve standing as an aggrieved person is an element of impact on a commercial business.  Irritation that a trade mark is registered but isn’t being used, and hasn’t been for years, is not enough to establish you are an aggrieved person for the purposes of a revocation action.

Bob can definitely apply for revocation and the best date for effective revocation has been identified, but has Bob done enough investigations into use?

Genuine Use

It is well established in New Zealand through the oft-cited case of Metalman[3] that there is no de minimis principle involved in the assessment of genuine use.  That is, a single genuine use of a trade mark in the course of business can be enough to defend a trade mark registration under attack.

Under the Trade Marks Act 1953, the Commissioner had discretion when assessing whether a trade mark could be supported by the use file.  For many years since the implementation of the replacement Trade Marks Act 2002, a certain level of leniency in assessing use was applied.  The Commissioner in cases could be found to apply a residual discretion when assessing use.  Therefore, evidence of a trade mark that was quite like the registered trade mark, being used on associated goods or services, could be enough to defend a revocation action.

That leniency came to an abrupt halt in 2017 with the Lacoste case[4].  It was confirmed in Lacoste, and in every case since then, that no discretion regarding an assessment of use is provided for under the 2002 Act.  The trade mark as registered must be used on the goods and services described in the registration. 

Therefore, while Metalman establishes that there is no minimum amount of use required, it is clear that however meagre the evidence it is, it must show use of the trade mark on the goods and services. 

Things are looking good – Bob has grounds to apply for revocation, a date, and hasn’t found use in the relevant period but there is one more hurdle to consider – could the owner have a good reason for pausing use?

Special Circumstances

Section 66(2) of the Act provides a second line of defence for a registered trade mark owner where genuine use cannot be shown where “non-use is due to special circumstances that are outside the control of the owner of the trade mark”.

As confirmed in Manhaas Industries[5] where a business should reasonably be able to anticipate difficulties and plan an alternative action to manage factors – such as a new source of product – the reasons for non-use may not be considered “special circumstances”.  

It is also not enough for Bob to simply look at potential disruptions in normal trade channels.  As confirmed in the case of Fokker Bros[6], occurrences not in trade can also constitute special circumstances – for example difficulties suffered during a breakup coupled with actions of the company director not on behalf of the company could constitute “special circumstances”.

A good rule thumb to apply is: if a business should be able to anticipate and manage an interruption, bearing in mind the nature of the business and its usual operating parameters, then the cause of that interruption probably isn’t a “special circumstance”.

Special Note for 2020!

Bob should bear in mind that while businesses not using their trade mark now might be able to point to the impact of Covid-19 as a special circumstance, the situation may be quite different for businesses set up now and not using their trade marks in three years’ time.  Where a business has been set up during a pandemic, interruptions due to the pandemic should have been considered as part of the factors in normal running of that business.  Future delay may not be able to point to Covid-19 as a “special circumstances”.

What Next?

Revocation for non-use can be a good tool in the right hands, but there are other options which should be considered before launching into proceedings that, if contested, could take years to resolve.

Have a potentially problematic registered trade mark interfering with your business?  Talk to us today.

[1] International Consolidated Business Proprietary Limited v SC Johnson & Son Incorporated [2020] NZSC 110 wherein the Supreme Court considered an attack by ICB  on the grounds that because the revocation did not take effect until 22 April 2013, as at the date of application by Johnson of 19 April 2013, it was the owner of an identical trade mark on the register so Johnson could not be the true owner.  The Court in this case held that the simple fact of registration was not enough to thwart a claim to ownership.

[2] Nitro AG v Nitro Circus IP Holdings LP [2020] NZIPOTM 23 at para [16]

[3]  Metalman  New Zealand Limited v Scrapman BOP Limited [2014] NZHC 2028

[4] Crocodile International Pte Ltd v  Lacoste  [2017] NZSC 14 confirms that while Commissioner’s discretion existed under the Trade Marks Act 1953, on consideration of the sections relating to non-use in the 2002 Act, no residual discretion remains.

[5] Manhaas  Industries (2000) Limited v Fresha Export Limited [2012] NZHC 1815 the Court agreed with the Assistant Commissioner’s conclusion that sourcing fish, and managing difficulties in supply and quality of fish, should have been a routine challenges for the business.  Therefore non-use due to these factors was not a special circumstances.

[6]  Fokker Brothers Limited v Fokker Brothers Inc Limited [2019] NZIPOTM 2 confirms that the “in trade” requirement in the Trade Marks Act 1953 was not part of the current 2002 Act.  Special circumstances could any be external forces rather than voluntary acts of the owner.

Can and Should an Incorrect Owner Name be Corrected by Assignment in New Zealand?

…The best laid schemes o’ mice an’ men
Gang aft a-gley,
An’ lea’e us nought but grief an’ pain,
For promised joy!.. 1

Discovery of legacy errors in trade mark registration ownership can be the bane of the trade mark attorney as well as the trade mark owner.

Review of a robust portfolio can quickly descend into clammy realisation that action is needed to ensure the true and current owner can rely upon its register rights.

The usual way to update ownership in New Zealand is to record an assignment. However, sometimes the first owner on the Register should never have held the registration. This article considers whether an assignment of rights in this circumstance is an appropriate action.

Hornby Mall Ltd v Shopping Centre Investments Limited2

The 2020 decision of Hornby Mall Ltd v Shopping Centre Investments Limited (“Hornby Mall”) considered an update of owner through either assignment or alternatively a request for rectification of the register.

History of Hornby Mall

In 2005 Shopping Centre Investments Limited (SCIL) sought registration of Hornby Mall’s logo. The application was initially filed in the name of “Hornby Mall”. On request from the Intellectual Property Office to properly identify a legal entity as the owner, the attorney instructed that the owner should be Hornby Mall Limited.

Hornby Mall’s logo

This is where the wheels start to wobble.

Hornby Mall Limited (HML) was in fact an entirely separate legal entity in no way connected with SCIL or the mark. Entry of HML as the owner of the 2005 application was not noticed by SCIL.

In 2007, a replacement application was filed for THE HUB Logo. This fresh application was lodged in the name of HML. Again, SCIL did not notice entry of the wrong owner details. This application then matured to registration in the name of HML.

In 2017 on request for renewal instructions, SCIL noticed the owner name was wrong. By this time, HML was no longer in existence, having been struck off the Companies Register in 2015.

The two hurdles facing the attorneys were:

  • How to enter SCIL as the owner; and
  • How to ensure the registration is valid from the date of application.

The Legislation

New Zealand Trade Marks Act 2002, section 32, states the applicant for registration must be:

(1) A person claiming to be the owner of a trade mark …”

Section 76 of the New Zealand Trade Marks Act further provides for “rectification of an error or omission in the register” with the restriction that “an application for rectification of the register may not be made in respect of a matter that affects the validity of the registration of trade mark”.

Meanwhile in Australia – Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd3

In 2017 in Australia an opposition case Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd (“Pham Global”) was decided. One of the grounds of opposition was that the applicant for registration was not the true owner of the trade mark.

Australian Trade Mark Act 1995 section 27 is broadly equivalent to the New Zealand section noted above. Section 27 of the Australian Act states the applicant for registration “claims to be the owner of a trade mark…”.

The applicant, an individual named Mr Pham, sought to defeat the opposition grounds that the applicant was not the true owner by assigning the application to the company Pham Global Pty Limited.

On consideration of the assignment and the opposition ground the Court held that “Mr Pham did not have any legal or equitable interest in the IR composite mark. Mr Pham made the applicant claiming to be the owner when he is not4. Therefore, “Mr Pham could not assign that which he did not own5.

For this reason, an assignment could not be recorded to update the owner and the opposition succeeded.

Same-Same but Different

Like Pham Global, in Hornby Mall the attorneys were faced with a situation where the applicant on record, HML, had no legal or equitable claim to ownership of the trade mark. The issue to consider is whether an assignment to SCIL would ever be able to be effected.

However, there are a key difference in the cases. In Pham Global:

  • The applicant Mr Pham made an explicit claim around ownership by lodging the application.
  • Mr Pham knew the company who should have owned the application.

In Hornby Mall:

  • HML was not involved in the application and was in fact entirely ignorant of rights entered on the register in its name.
  • SCIL was able to demonstrate clear use rights in the trade mark as well as ownership of copyright in the logo.
  • Evidence clearly showed that entry of HML as owner was as a result of an error in 2005.

The Commissioner’s decision rested on the fact that “there is no evidence before me that HML had any substantive ownership rights … HML has never had any rights or interest in the name The Hub Hornby or the relevant mark”6.

The Commissioner stated that Hornby Mall is not “a case where SCIL should have sought an assignment from HML. First and foremost, by the time… the error was discovered, HML had been removed from the companies register. Secondly… HML appears to have had no ownership rights in the relevant mark that it could assign”7.

Therefore, while an assignment was briefly considered, the Commissioner agreed in this case rectification of the register was preferable.

Should an Assignment be considered as an option to update ownership in cases like Hornby Mall?

In the writer’s view where the applicant on record is a legal entity but has no legal or equitable interest in the trade mark, the position of the Court in Pham Global is correct and an assignment to update owner cannot be effected.

Intellectual Property is not the same as Real Property

The Torrens principle of indefeasibility of registered owner’s title for real property is confirmed in Frazer v Walker8. The Privy Council in that case confirmed that a registered owner will obtain an indefeasible title to an interest or estate upon the act of registration. While the Land Transfer Act 2017 confirmed judicial discretion exists to cancel an owner’s registration of title in cases of “manifest injustice”, as far as land law is concerned, the position reflected on the register is king.

The effects of incorrect register details parties with interests in land are therefore immense and correction of errors on the register not something easily achieved.

However, intellectual property is not real property.

One of the main differences is the acknowledgement that intellectual property rights can exist in purely equity. To then allow that an assignment could be possible from a party who has no equitable claim to ownership of a trade mark seems to mis-apply the Torrens real property principle to intellectual property and allocate the register a status potentially in conflict with common law ownership.

Take Home Lessons

In the writer’s view, where an applicant has no claim to a trade mark, the only proper avenue to ensure those trade mark rights can vest with the true owner is to seek a rectification of the register. Where rectification of the register is not possible, the registration must be fatally flawed.

The Commissioner in Hornby Mall raised concerns regarding the extreme delay in notice of errors in the application and the errors then made in the declarations supporting the request for rectification. While ultimately the decision went in the applicant’s favour, there is no guarantee the facts will always be so overwhelmingly supportive for rectification of the register.
Careful and diligent attention to detail is key:

  • Check and double-check ownership details at application, acceptance and registration.
  • Fully consider corporate structure and ownership of intellectual property including trade marks before lodging applications.
  • Advise your attorney immediately of any changes to corporate structure.

Trade mark attorneys and trade mark owners both should be alive to the potential for extreme loss of rights where errors in owner details remain on the register. Review of details at routine intervals can help avoid the worst-case scenario.

Driving Research & Development in a Downturn

In challenging times, the natural reaction of many businesses is to minimise expenditure in an attempt to ride out the storm. Research and development investment may be seen as an unjustifiable expense. However, studies of past recessions have shown that companies that maintain, or even increase, research and development levels during downturns outperform others when market conditions improve.

In a 2003 study of nearly 1000 businesses from around the world and across a wide range of industries, Roberts found that investments in marketing, product development and customer-perceived quality were “good costs” that should be increased during market recessions in order to maximise growth and market share upon recovery.1 As shown below, firms that increased spending on marketing and product development increased their ROCE (return on capital employed) and market share over the recovery, as did firms whose product quality was seen to have increased.

Marketing Spend

Product Development Spend

Customer-Perceived Quality

Others have found that research and development spending increases growth in times of market stability, and that this effect is magnified during recessions.2 In the period from 2004 to 2009—spanning the 2008-2009 global financial crisis—Norwegian firms with low R&D spending grew by 29% on average, while firms with high R&D spending grew by 103%. This effect was most pronounced during the crisis – the high R&D firms grew by over 10% in this period, while other firms contracted.

Investments in innovation and product development may not pay immediate dividends, with benefits typically not accruing until after the worst of the recession has passed. This illustrates the importance of long-term strategic thinking over knee-jerk reaction. The passing of the baton from the US to Japan in the field of semiconductor manufacture illustrates this point.

In the early 1970s, US suppliers of semiconductor devices outsold their Japanese counterparts by more than two to one. However, by the end of the 1980s they had fallen behind the Japanese. Writing for the MIT Sloan Management Review, Ghemawat notes that in the aftermath of the 1974-1975 recession, US companies eased up on investment, while Japanese companies held firm.3 In such an innovation-driven and rapidly changing industry, this brief pause was enough to fall behind. To take a specific case, US manufacturers failed to invest in production capacity for 16 kilobyte dynamic random access memory (DRAM) chips during the downturn, which left them unable to meet demand from IBM when the upturn came. This forced IBM to turn to Japanese suppliers, who by 1979 had captured 43% of the US market for 16 k DRAM chips.

Of course, businesses operate under financial constraints and any money spent on research and development is money that is unavailable to spend on other things. The right level of investment will be a balance between the competing requirements of retaining sufficient resources to see out the difficult times and setting the stage to benefit once market conditions improve. One way that this balancing act can be made easier is for the Government to subsidise R&D costs, which has been shown to increase overall R&D expenditure.4 Research and development during difficult times benefits a society as a whole, as does a thriving and competitive market, making it an ideal use of public funds.5 The Singaporean Government has recognised the importance of this and recently increased funding levels available under its Enterprise Development Grant up to 90% for companies severely affected by COVID-19. In Australia, the ATO is allowing IP assets to be immediately deducted against taxable income, rather than depreciated, under an expanded Instant Asset Write Off scheme. In New Zealand, a number of funding sources and tax credits are available. In addition, Callaghan Innovation has indicated increased flexibility in relation to R&D grants due to the impact of COVID-19, and we hope new programmes will be forthcoming soon.

The message from history is clear: money spent on research and development during a recession has been shown to have general and specific economic benefits. A positive strategy including an active research and development programme can have many other positive effects at the company level. It allows the company to retain quality staff by giving them satisfying and engaging work when they might otherwise be underutilised, retain existing clients and gain new ones with superior products, and be ready to capitalise on new products and skilled staff during the recovery. Where companies are not in a position to invest in research and development, there is a role for Government to provide subsidies to promote public well-being and economic growth.

1 Roberts, “What strategic investments should you make during a recession to gain competitive advantage in the recovery?”, Strategy & Leadership, Vol. 31 Iss 4 pp. 31–39.

2 Lome et al, “The effect of R&D on performance: Do R&D-intensive firms handle a financial crisis better?”, Journal of High Technology Management Research.

3 Ghemawat, “The Risk of Not Investing in a Recession”, MIT Sloan Management Review Spring 2009, Vol 50 No. 3.

4 Hud et al, “The Impact of R&D Subsidies During the Crisis”, Centre for European Economic Research Discussion Paper No. 14-024.

5 Barlevy, “On the Cyclicality of Research and Development”, Economic Research, Federal Reserve Bank of Chicago.

A Place for Intellectual Property in Times of Crisis

The impact of Covid-19 has made itself felt internationally and is likely to stretch considerably into the future.  In times of crisis, focus necessarily turns to home and health, and doing what you must to ensure day to day life is manageable.  But it is important to bear in mind that, eventually, we will come out the other side and we will need to pick up life in the new normal.

While aspects of life that aren’t essential may be easily sacrificed in the short term, you should also have a plan in place for the new normal.  Your IP rights should form part of that plan.

What Should You Do?

Step 1 – Review what you have

If you already have registered IP protection in place, now is a good time to seek an overview of what you have covered and when renewal of rights fall due.

Review what IP you have in use or under development that is not covered by your existing registered rights.  Do you have any current or projected IP that could provide a competitive advantage in the future?

Step 2 Identify potential vulnerabilities

Brand and marketing experts are predicting a dramatic increase in counterfeit products and mis-used trade marks as commerce necessarily moves onto a digital and social media platform.

A review now should allow you to identify gaps in your protection.

Step 3 – Develop a strategy for best positioning

Discussions with your IP provider with a clear understanding of budgets will help you set up a strategy to maximise your protection. 

This includes having a plan to manage renewal of already registered IP rights, finding options to firm up any vulnerabilities, and strategically securing fresh registered IP rights to protect your points of competitive advantage.

Do not be shy about having these conversations now.  Working with your IP provider at the early stage of planning means you can structure your approach and should be able to avoid the need for urgent, and potentially costly, protective steps down the line.

Step 4 – Maintain vigilant review of the market place

It is dangerous to assume that because we are in a time of crisis, other traders won’t try to take advantage of a lapse in rights, or perceived inability to enforce rights.

Quick action against obvious infringements may be a cost-effective way to stop third parties gaining a toehold that will affect your ability to re-enter the market.

What now?

With the right tools created now, you can have a path to success in the new normal.

Talk to us today to review your IP portfolio.

A Final Innovative Step: Australia Plans to Phase Out Innovation Patents (Update)

On 26 February 2020, the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2019 came into force in Australia. This begins the abolition of Australia’s innovation patent system.

Any innovation patent application must be filed before 26 August 2021. From that date, you will only be able to pursue a standard patent in Australia.

This will mark the end of Australia’s second-tier patent. Our earlier post discusses the background to this change.

This change will affect a number of New Zealand and Australian businesses who protect their incremental innovations which do not quite fit in the standard patent system. Get in touch with us to discuss how this change will affect your business.

SKY v SKYKICK – Lessons from Europe

The recent case of the Court of Justice of the European Union (CJEU) Sky v SkyKick[1] is being touted as one of the most important decisions for trade mark law out of Europe in the last couple of years. 

We discuss what all the fuss is about and what lessons can be learnt from this decision:

The Facts

Sky Plc and the related group of companies (“Sky”) is well-known for its range of broadcasting services provided under the trade mark SKY.  SKY is a registered trade mark in many countries, and has been successfully enforced throughout the years.

In 2012, SkyKick UK and SkyKick Inc (SkyKick) launched a range of cloud-based software services under the trade mark SKYKICK, starting in the US and extending internationally.

In 2016, Sky sued Skykick for trade infringement, relying on its United Kingdom (UK) and European Union (EU) registrations for SKY.

SkyKick did not take this lying down.  SkyKick attacked Sky’s trade mark registrations as invalid because the registrations included terms such as “computer software” which lacked clarity and precision, and included broad areas in which Sky could not reasonably claim any intention to use.

The first case Sky Plc & Ors v SkyKick UK Ltd & Anor[2]

In this 2018 decision the Court held that, on the face of it, there was trade mark infringement, but if the counterattack to Sky’s trade mark registrations succeed, the outcome of the proceeding may be significantly different.

In view of the potential effect of this decision on the parties and on other EU and UK trade mark registrations, Mr Justice Arnold referred the issue of validity of the SKY trade mark registrations to the CJEU for determination. 

The CJEU case

The key questions under consideration by the CJEU were:

  • Can an EU or a national EU Member State trade mark be declared partially or wholly invalid because some terms lack clarity or precision and third parties cannot identify the extent of protection?
  • If the answer to this is yes, is “computer software” one such imprecise and unclear term?
  • Is it bad faith to file for broad goods or services where there is no intent to use the trade mark on all those goods and services?
  • If the answer to this is yes, can an application made with certain broad terms be deemed filed in bad faith just for those broad terms?

In its decision issued January 2020, the CJEU confirmed:

  • EU or national EU Member State registrations cannot be declared partially or wholly invalid on the grounds that some terms lack clarity or precision.
  • However, an application made without intent to use can constitute bad faith if the application was filed either with an intent to undermine third party rights or in a manner inconsistent with honest business practice.  There is no need for a third party to be specifically targeted.
  • If the lack of intention to use only relates to some goods and services, then the bad faith only relates to those claimed areas.

This is good news for the owners of the many EU and UK trade mark registrations where the description of goods includes terms like “computer software” – an acceptable term in trade mark applications for many years!  It may however be bad news for owners of registrations secured with broad terms filed as a defensive measure and with no true intent to use the trade mark for those broad goods and services

What does this mean for new trade mark applications?

It is often thought of as best practice when filing an application to claim the broadest right allowable under the law of the country in which the application is lodged. 

However, it is a balancing act between covering a broad area and ensuring the described area is still within the area of intended use, particularly where a country requires a declaration of intention to use at the time of filing.

It is also risky to use the same filing method for applications over the years as cases are continually being decided which modify the parameters of what is best practice.

A trade mark professional will be aware of up to date cases as well as the technical aspects of filing a trade mark application. With this knowledge, an experienced professional will be able to tailor an application so that the trade mark owner has the advantage of the best filing at the time the application is lodged for the specific country of interest.

What does this mean for your registered trade marks?

Once a trade mark is registered, it should not simply be left on the register with no attention beyond renewal every ten years. 

As you nurture and grow your business, so too should you care for your trade mark registrations.

Depending on the nature of the business, trade mark registrations should be routinely reviewed to assess compliance with any new laws and to ensure registered coverage reflects the area of use and best practice for registered rights.

What does this mean if you are getting ready to sue someone?

The first step to any infringement action is do your homework! 

Having a trade mark registration is not a magic bullet to stop third parties. 

Before raising an objection, you should conduct careful investigations into the offending company.   It may have trade mark registrations or common law rights that would affect the strength of your position.

Of no less importance, you should carefully check your own trade mark registrations and common law rights.  Any vulnerabilities should be identified and fixed, preferably before raising an objection.  Such preliminary steps will help ensure you have the strongest position from which to objection and help avoid counter-attacks that can delay an outcome in own infringement action for years.

Time and money spent in preparing to object can save you time and money in the long run.

Worried about your trade mark protection?  Talk to us today.

[1] Case C‑371/18

[2] Sky Plc & Ors v Skykick UK Ltd & Anor [2018] EWHC 155 (Ch)

Intellectual Property in the Post-Brexit UK

After more than three years of negotiations, the UK has officially left the EU as of 31 January 2020.

For now, business as usual

Part of the deal includes a transitional provision that will run until 31 December 2020. During this period, EU laws will continue to apply in the UK while negotiations take place to determine the terms of the relationship in the future. Any changes to intellectual property rights will not happen immediately and there is no rush for you to address potential changes.

Things to note

  • Any registered EU trade marks or designs will be transferred to equivalent UK rights. You do not need to take any action. At the end of the transition period, owners of registered EU rights can expect to receive an equivalent UK registration.
  • Owners of any pending EU trade marks or designs will have nine months in which they can apply for the same protection in the UK and the same priority date will be allocated. There will be fees related to this step.
  • Brexit will not affect any European patent applications or granted patents, as the European patent system is independent of the EU.
  • On 27 February 2020 the UK withdrew from the UPC. The UK will remain part of the European patent system.

We will contact our clients who have rights that may be affected by Brexit directly with an outline of options. But if you have any queries, let us know – we are here to help.

An Expensive Ear-Worm: Why You Don’t Hear Frosty the Snowman © in the Mall

At about this time every year the debate about best and worst Christmas music heats up. As we move through the month of endless repetitions of the same batch of Christmas songs blaring through the shop stereo, you might notice you never hear your favourite ditty and pause to ask: whatever happened to Frosty?

The answer may be copyright.

The recent High Court case of Australian Performing Right Association Limited v JT Hi Fi Limited and John Tom1 reminds us of the importance of understanding when you might need to secure permission before playing music in your store. In this case JT Hi Fi Limited trading as Paul Money Hi Fi played five songs in its Mt Eden store without securing a license to so do. Because the music was used to demonstrate sound quality, the Court held it was a public performance under the Copyright Act and one authorised by JT Hi Fi and Mr Tom.

In the absence of permission from the copyright owner, JT Hi Fi and Mr Tom were held to have infringed copyright in the works. The Court awarded compensatory damages of $2,123.20 with additional damages of $15,000 to the copyright owner.

Because copyright is an unregistered right, the owner of copyright does not need to have ownership listed on any particular index in order to claim those rights. But you can still take steps to minimise the risk that your catchy tune could result in an expensive outcome.

• Performers rights may be indexed, so do some searching.

Queries through the Australasian Performing Right Association (APRA) and Australasian Mechanical Copyright Owners Society (AMCOS) is a good first step.2

• Traditional music is more likely to be out of the period for copyright protection.

Copyright has a limited life so the older the music, the more likely it is that any copyright term has expired. You should bear in mind that traditional Christmas carols may be safe to use, but modern re-working of traditional carols could still attract copyright.

• Seek help from a professional.

Assessing whether you are at risk of breaching another person’s intellectual property rights is not something that should be treated lightly. Using someone who conducts these sorts of checks for a living can save you time, and may in the long run be the difference between Christmas cheer and a nasty letter.

1 [2019] NZHC 2508.