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Managing your intellectual property during crisis: lessons from the GFC

COVID-19 is a global humanitarian and financial crisis that throws us into unchartered waters almost daily. The last time we saw this level of economy-wide pressure on businesses was during the 2007-8 Global Financial Crisis.  

The effects of COVID-19 are already being keenly felt across all industries, with the logical consequence that businesses are looking for ways to evaluate their expenses and budget for future costs. Intellectual property will be one of those expenses for almost every business. IP rights are a critical asset that need to be managed cost effectively, but in a way that does not compromise rights and the financial viability of the business in the longer term. 

In a crisis, scenario planning can help businesses respond with a forward focus – feeding in data and projections as they come to hand. However, there are lessons we can take from past crises like the GFC to avoid a re-run of past mistakes. 

In this article, we set out the key lessons from the GFC about IP rights management that can be applied today. 

The big picture – be strategic in managing your IP rights 

The biggest take away from the GFC was the importance of approaching IP-related costs strategically. 

Businesses that took this approach were able to reduce their costs, without compromising their position when the economy rebounded. On the other hand, businesses that treated their IP expenses as a balance sheet line item and made wholesale cost-cutting decisions were left compromised with unintended and long term consequences e.g. key innovation unprotected (or worse, snapped up by their competitors) and key personnel disaffected. 

Taking a strategic approach to managing IP rights – both protection and enforcement – underpins the following five key lessons: 

Lesson 1: Manage existing rights with an eye to the future 

During the GFC, some businesses took the wholesale cost-saving measure of abandoning entire trade mark, domain name, design or patent portfolios, rather than paying renewal fees. This left them with no protection when the economy rebounded. 

Businesses should certainly review their portfolios to identify cost savings, but should do so carefully and with an eye to the future. For example, are there any registrations for historic brands that are no longer being used or products that are no longer being made that can be safely allowed to lapse without jeopardising future revenue? On the other hand, what registrations are mission-critical and must remain protected – and does the existing portfolio provide sufficient protection? 

Lesson 2: Registered trade marks – use them or risk losing them

The trade marks registration system in most countries, including Australia, incorporates a ‘use it, or risk losing it’ principle. In Australia, the general rule is that a registered mark that has not been used for three years can be removed on the basis of non-use.

Although the requirements to demonstrate ongoing use of a mark are not particularly onerous, this should be kept in mind if a business decides to temporarily shut down a product line with the intention of reviving it once economic conditions improve. 

Lesson 3: Identify new rights as they are developed and consider appropriate protection now 

Businesses should ensure any new rights which are capable of registration are identified internally as they are developed, and their revenue potential evaluated, so that the business’s financial investments can be structured appropriately. Ideally, businesses should create an IP register which includes the chain of title (e.g. details on the inventors and their terms of engagement and written IP assignments).

During the GFC, we saw many businesses decide not to file new applications as a way of saving costs. In the case of patents and designs, applications cannot be filed after they have been publicly disclosed (with certain, limited exceptions). This meant that those businesses could not protect their designs and inventions later, leaving them with no protection from copycats and losing out on potentially lucrative licensing revenue streams. 

In the case of trade marks and domain names, businesses that wait to file until later run the risk of opportunists ‘beating them to the punch’ and squatting on their rights, as we discuss below. 

Where workforces contract (or expand as businesses pivot to meet unforeseen pandemic-driven demand), be careful to ensure trade secrets and IP ownership are not compromised. We’ve previously written on the key considerations for IP ownership and they apply with equal force in turbulent times. Look after the people who know your business and generate its IP (otherwise your competitors will). 

Lesson 4: Watch out for opportunistic squatters 

Opportunistic trade mark and domain name squatters are an unfortunate feature of the landscape and a scourge on many businesses. 

We expect to see an increase in this activity in the coming months, as opportunists wait to see what trade mark and domain name registrations are abandoned. We saw an uptick in this activity during the GFC, with previously abandoned trade marks and domain names being offered back to their original owners at many multiples of the cost it would have taken to maintain them in the first place. 

The same is true where a new brand is launched: without seeking appropriate protection, you become exposed to trade mark and domain name squatters who will to file applications with the sole purpose of extracting a premium price from the rightful owners. 

For trade marks, the consequences of not filing are particularly severe in countries that have a ‘first to file’ trade mark system, like China. In those countries, rights are determined by the date on which an application was filed, disregarding any prior use the true owner may have made. 

Even in countries like Australia that recognise ‘first to use’ rights, the cost of using the system to regain control of your brand will almost certainly be higher than the cost of filing a new application in the first place. 

Lesson 5: Take appropriate, cost effective action against infringers 

Even in difficult economic times, businesses should still monitor infringment of their rights. 

Given the far reaching effects of COVID-19, it is in many respects an even playing field – this lends itself to quick and commercial resolution of matters. A letter of demand may be more forceful than ever when businesses have their eyes keenly on avoiding unnecessary expenses. 


Authors

HAY-kate-highres_SMALL
Kate Hay

Head of Intellectual Property

MAK Sandy SMALL
Sandy Mak

Head of Corporate

DUNLOP Alex SMALL
Alex Dunlop

Special Counsel


Tags

Intellectual Property Trade Marks Corporate/M&A Board Advisory

This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.