It's a patent rip-off

Sue Hoban | The Manly Daily | 27 October 2004

"There are a lot of small businesses that have become very large businesses by standing their ground in regard to patents" - Lawyer, Noric Dilanchian.

FORMER Australian Design Award winner Dean Bennell received a brochure the other day trying to sell him one of his own designs - the only problem was it didn't bear his Blueye Eyewear brand.

It was a direct copy produced by an Italian company. The copy will now line up in shops alongside his patented product.

Another local design award winner, Phil Peach, founder of 20-year-old electronic equipment manufacturer Elsafe, has now counted five copies of the new power socket for which he earned his design award in 1998.

While small businesses like these continue to see imitators siphoning off the profits of their research and development effort, the Federal Government is continuing its strong push for small and medium-sized businesses to become more savvy about protecting their intellectual property. According to an IP Australia spokesman, this has seen a surge in patent and trademark registrations in the past five years, but he said small business awareness of IP protection still remained low.

But registering a patent, which in theory provides, monopolistic rights, is one thing. Trying to enforce that protection in the face of well-resourced challenges is quite another, which is why the debate about the pros and cons for small businesses of paying for IP protection is becoming more polarised.

Phil Peach has come to the conclusion that it can actually be counter-productive to try to enforce a patent - particularly against a large infringer with deep pockets - not only because of the cost and the uncertainty of being able to prove a case-in court, but also because it takes focus away from the core business.

"They can run you ragged," he said. "They have the-time and the money to keep nitpicking and it just isn't worth the money. It takes your attention away from your own business. My son is an IP lawyer and he tells me: don't fight it; move on because it's generally cheaper to develop a new product than defend an old one. Unless it's something quite revolutionary it's just not worth spending the money."

Defending patent a costly exercise

Dean Bennell beat large companies like Ford, Nokia and Sunbeam to win the overall Design of the Year Award in 1998 for his new style of protective goggles for sport and industry. But he knows he could never pull off another David versus Goliath effort if he tried to take on the large companies which are now selling copies of his products. He estimates their copies - bearing their more prestigious logo - could have cost him around $1 million in sales already.

The Killarney Heights inventor outlaid an initial $50,000 to register design patents and trademarks and quickly spent another $60,000 trying to fight the first copies to hit the market before he realised how heavily the odds were stacked against him.

"I had to pull the pin," he said. "If I had pursued it any further I'd-be broke. I'd be gone now."

As a result he is now very sceptical about the value of investing in patents and says given his time over, he would only, worry about obtaining trade mark protection, not protecting his designs. "I own Blueye world-wide and my name is now the most valuable part of my business, not the product we manufacture," he said. "Two years after my product was launched and I won the design award I went to a trade show in China and saw my product being sold by multiple manufacturers. How do you take on a company in China?"

"At the end of the day what a patent is worth in this country is whatever amount of money you have got to fight for it. If you're a small business starting up and you haven't got any money to enforce it, it's not worth the paper it's written on."

There has also been criticism that even when companies do try to protect their turf, the Federal Court has not been prepared to enforce patents. A Queensland lawyer found through the 1990s only 20 per cent of companies that went to court to fight infringements were successful.

On the other side of the debate is intellectual property lawyer Noric Dilanchian who acted for peninsula swimwear business Absolut Beach when it was accused of trademark infringement by alcohol giant Absolut Vodka three years ago. They were eventually forced out of business by legal actions mounted in the UK and the US, despite having had their trademark registered in Australia.

Be protective of your business intelligence

But Dilanchian remains-a staunch supporter of Australia's IP protection system. He also maintains businesses seeking to protect their intellectual property should not just rely on legal means; they should take a holistic approach encompassing other non-legal forms of protection.

This included developing an organisational culture - as well as the more formal safeguards like confidentiality agreements where appropriate - to ensure staff and contractors did not walk away with a company's IP.

He said businesses also needed to be very astute in negotiating deals and contracts to ensure they didn't give too much away. "Part of business is to get business intelligence so if an overseas company shows interest in an Australian company it may be purely because they want business intelligence. The more you talk, the more they will listen so for good salesmanship the idea is that you should stop talking at a certain point and ask for some financial commitment before you go on."

He does concede that smaller businesses with limited resources could be disadvantaged under Australia's IP protection system but he makes no apology for that. "Sometimes it's a very intelligent business decision not to stand your ground on a particular item of copying because it's going to cost you too much, but that shouldn't be expanded into a statement that patents are not worth what you pay for them," he said.

"The legal system requires an enormous amount of detailed evidence and if you don't have the resources needed to achieve that level of reporting detail then you are not going to succeed. "The legal system produces quality but unfortunately that detail can bury people in cost and some people do use that to their advantage.

"People need to make a judgment as to whether they will go down the path of using the legal system or not. But there are a lot of small businesses that have become very large businesses by standing their ground in regard to patents."

One company which can claim a win in protecting its IP is DataDot Technology. It developed a patented spray-on system for applying identifying micro dots to create an antitheft system for cars which is now being used around the world.

The Frenchs Forest company was the first in Australia to be granted one of the new Innovation Patents introduced in 2001. It was also the first to successfully defend an Innovation Patent in court after a person formerly associated with the company started using a similar application system. DataDot's executive chairman, Ian Allen, said he sympathised with the difficulty small business had in defending its IP but the company believed it had to defend its R&D investment.

You have to defend your own backyard," he said. "Taking out a patent is a deterrent so you always have that gun loaded for anyone who tries to invade your turf."

But it isn't cheap. He said DataDot had spent almost $400,000 fighting the infringement, all of which it would have to bear because of the financial circumstances of the other company. He said trying to negotiate the patent systems of different countries and then defending rights was a "minefield" for small companies and he just hoped DataDot would never have to defend itself against a larger, more powerful player.

"I would hate for one of the big boys to take aim at me, make some token changes and go into the market," he said. "You find out about it; you object and they say, "Take us on". They can put you out of business."

But he said he still believed in establishing a first line of defence through patent protection. "You just can't do all that work and then allow someone to jump in on you," he said. "Now we have the patents in place and we have set the precedent that we are prepared to defend them."

Information about IP protection and available resources is available at ipaustralia.gov.au.

Reproduced courtesy of The Many Daily

 


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