Indira Gandhi

National Open University MIR-038

School of Law
Commercialization of
IP

Block

1
INTRODUCTION TO COMMERCIALIZATION
OF IP
UNIT 1
Significance of Commercialization of IP 5
UNIT 2
Protecting Your IP Rights 11
UNIT 3
Introduction to IP as a Business Tool 21
UNIT 4
Mechanisms for Leveraging IP as a Business Tool 30
Introduction to
Commercialization

4
 Sogmofocamce pf
UNIT 1 SIGNIFICANCE OF Commercialization to IP

COMMERCIALIZATION OF IP
Structure
1.1 Introduction
1.2 Significance of Commercialization of IP
1.3 Examples of Success Stories
1.4 Examples of Failed Attempts at Commercialization
1.5 Evaluating Reasons for Success or Failure of IP in Commercial Context
1.6 Summary
1.7 Self Assessment Exercise
1.8 References and Suggested Readings

1.1 INTRODUCTION
Intellectual property (IP) are creations of the human intellect that can be protected
under the law. Such creations of human intellect include artistic and literary
work such as painting, sculptures, cinematographic works, photographs, music,
literature, computer software, marks and logos used in trading, inventions, the
trade secrets and confidential information therein etc. which in the knowledge
economy of today are valuable intangible assets collectively known as Intellectual
Assets (IA). As and when these IA fulfil the statutory criteria of intellectual
property laws of a country, they can be accordingly registered the relevant
intellectual property (IP). Thus,
a) inventions that fulfil the criteria of patentability under the prevailing patent
law are granted as Patent,
b) marks and logos registrable under the Trademark laws are registered as
Trademark,
c) the original artistic and literary work as Copyright,
d) novel visual features as industrial designs etc.

On such registration by the statutory authority, these IPs assume the qualities of
“property”. Just like any real property, IP can also be used for creation and
generation of wealth by way of buying, selling, licensing of the IP. Subject
matter of intellectual creations that are not protectable under a statutory law are
still valuable and form intellectual assets (IA) of significant value. In India,
such IA includes trade secrets, confidential information, technical know-how
etc.

However, before it can be put into the market or commercialized, due care must
be taken to understand:
a) whether there is a market for that particular intellectual property and
b) whether there are competing products and / or services
c) the pricing strategy
5
Introduction to d) the advertising strategy and
Commercialization
e) the branding strategy
a) Existence of a market for a particular intellectual property: There are
different types of intellectual property, as explained further in Unit 3, and
these have very specific qualities. For instance, a trademark which is used
by an entity for a car and with which the people identify the car, cannot be
used by a third party for selling his cars. Where the trademark is a well-
known mark, its use for sale of other unrelated products such as clothes or
shoes are also prohibited for fear of dilution of the said trademark.
To cite another example a brilliant invention which has been patented cannot
be marketed in a region that does not provide ancillary services. For
example, a patent on a particular technology for example 3G technology is
a great advancement both in technology and asset to the owner of intellectual
property; however if there is no service support for 3G technology in a
country then this technology cannot be marketed in that country. In effect,
commercialization of IP of that product fails to take effect in that country.
Therefore, it is imperative to ensure that a market exists for a given intellectual
property. In some instances especially in case of fast moving consumer
goods even if there is no market, market demands can be created by way of
niche market advertising. A case in point is the creation of a market for the
sale of soft drinks and ice-creams in winters.
b) Existence of competition: Before commercialization it is imperative to have
a clear understanding of the competition that exists in the markets that you
wish to enter with your intellectual property (please see Block 5). For
instance, in the soft drinks industry where the market is already crowded
with a large number of brands it requires a particular inventive and creative
strategy to introduce a soft drink with a new trade mark; which the market
has never ever heard. An excellent example of this situation is the creation
of a new market for a Pepsi Cola which is now posing stiff competition to
the original cola, the Coca Cola; or for that matter a new bathing bar or
personal products.
c) The pricing strategy: The pricing strategy plays a very important role in
commercialization of intellectual property. A product for example may sell
at a premium dollar price in one country while the IP owners of same product
in another country may adopt a different strategy and may thus examine a
novel public distribution channel to reach volume sales. There is a careful
consideration in adopting a different marketing strategy based on the need
for that product, the pricing power of the consumer and the competition.
A very relevant example of this is found in the field of pharmaceutical
products. The pricing strategies have been applied to ensure that a maximum
number of people are buying their products and services across the globe.
d) The advertising strategy: is of crucial importance taking into account the
sensibilities of the local culture. Sale of certain products are taboo in certain
cultures while in others they are banned by law. For instance liquor and
cigarette advertisements are banned in India by law. Similarly sale of products
made of beef or pork may be inadvisable in certain areas due to local
sensibilities even if sale of such products do not face a legal sanction.
6
e) The branding strategy: A brand is where all the IP and IA in a product and Sogmofocamce pf
Commercialization to IP
/ or services come together to capture its essence and thereby promises a
unique experience to the buyer. The term “brand” is often interchangeably
used with trademark; but a brand transcends the individual properties of
various intellectual properties including trademarks to consolidate all that
the various intellectual properties associated with that product or service
represent to finally represent the ultimate intellectual asset.

For instance, a bag from Louis Vuitton projects an image of dependability and
style. This image is a consolidation of a number of factors that include the strengths
of each of a tangible and intangible asset. Intangible assets such as the patents on
its structure, locking mechanism, strolley, etc, the design of the luggage, the
colours used that symbolise and represent the corporate values, that are in itself
protectable as trademark or trade dress, creat a brand that is a statement of style
and quality.

It goes without saying that every venture must be preceded with a due diligence.
This due diligence must be carried out not only of the market and the prevailing
environment without, but also the strategy and weaknesses prevailing within the
organization that seeks to market their IP. The strategy planning for
commercialization of IP begins with an IP audit which has been described in
detail in Bock 4. This must be followed by strategic planning which has been
described in detail in Block 3. The due diligence preceding the commercialization
of IP will include due diligence on potential business partners, conducting a
freedom-to-operate search while commercialization strategy could include market
analysis pricing strategies, branding and advertising strategies.

1.2 SIGNIFICANCE OF COMMERCIALIZATION

OF IP
Depending on the type of intellectual property which has been explained in detail
in Unit 3 there may be life for a particular IP. For instance, in case of patents,
there is a limited period of protection which is usually 20 years from the date it
is first filed. So the patent term is in itself a limiting factor.

There is also the life of a particular product in a given socio economic situation
in a technology driven consumer market an intellectual property may have
between six to three years of product life before the technology become obsolete.

In yet another scenario a particular brand may have come dated as something
which is associated with people of previous generation. It may not be viewed is
hip and happening and it may take substantial capital investment to turn around
the look & feel of company into something which is more contemporary.

In each of the above scenario the owner of intellectual property is under remains
pressure to optimize wealth creation or more markets. The commercialization
strategy for a particular IP is therefore very significant and has to be strategic,
planned and marketed. There may be questions that an IP owner may want to
ask before commercialization his intellectual property. These questions may
range from:

7
Introduction to a) Should he marketed himself or license it to a third party?
Commercialization
b) Should the license be exclusive or non exclusive license?
c) Should the license be for a given locality or for an entire region?
d) Should it be manufacture onsite or imported into the region?
e) Would it be feasible or cost effective to manufacture within the country?
f) Is it a good idea to outsource the manufacture?
g) Is a particular IP or the product on which the IP is based against the tradition
or customs of the given region?
h) Would there be a political or social sanction against that given IP?
i) If there is no social sanction and the IP can be introduced into that region, is
it for the urban or rural market?
j) If it is urban market what quantities must be made available to optimize
sales and if the product is marketable in the rural areas, what quantities will
suffice for sale?

1.3 EXAMPLES OF SUCCESS STORIES

All these strategies which take into account existing situations in the market,
including the socio-political-economic scenario are useful at the planning stage.
They provide an anchor and a guiding star for planning the entry into new markets
as well as fresh sales into an old market. However, the final success of
commercialization also depends hugely on foresight and luck.

Take for example “diagnostics”; it is unique industry1 . To achieve commercial

success, companies dealing in diagnostic kits must earn the approval of several
different groups, including regulators, payer organizations, healthcare providers
and physicians, all of whom ultimately determine the value of a product and
how well it will do in the market. For that reason, strategic market-focused product
development and effective commercialization are crucial.

Shara Rosen the author of six best selling editions of the industry’s leading market
search report in IVD diagnostics has developed a “six strengths approach” for
companies engaging in product commercialization, blending the solid marketing
theory with the realities of the diagnostics industry. These are:
a) Strategic Market Planning, including: Pricing, Clinical Trial Information
Management, Distribution, The New Customer Segmentation and more
b) Intellectual Property and Patent Protection, offers the basics of IP and
discusses whether to seek a partner.
c) Regulatory Process Management , including: US, Europe, Japan, India,
China and more
d) Reimbursement, looks at Trends, Past Successes and Failures, IVD and
the Obama Administration
e) Product Life Cycle Management, how to Tell Your Story, Scale Up, Build
a Organizational Structure
f) Market Forces Management, strategies for working with: Investors, the
Scientific Community, Consumers and more
8
 Sogmofocamce pf
1.4 FAILED ATTEMPTS AT Commercialization to IP

COMMERCIALIZATION
History is littered with tales of failed inventions. Many of these have been granted
patents, and appear to be a perfect tool to solve an existing problem. However
they have failed at successful commercialization due to several reasons. The
reasons may range from poor execution of the concept, inadequate publicity,
lack of support material / services on commercial scale, a strong lobby against
the launch of the product etc.

In support of innovation, Ralph Waldo Emerson is reported to have said “Build

a better mousetrap, and the world will beat a path to your door”. However,
taking the innovation to the market is a separate ball game, requiring rules that
are very different from those in the lab room.

Marc Castel2 characterizes some of the ways start up companies can go wrong.
They include:
1) Not starting with a customer in mind,
2 not staying on budget or meeting development deadlines,
3) not having enough resources at the outset to commercialize,
4) not having the necessary technical, business and legal expertise or guidance,
and
5) not managing IP effectively.
Despite these issues, one of the most significant problems he highlighted during
his talk was that failing ventures are not allowed to fail fast. In the US, failing is
frequently viewed as a badge of honour. Entrepreneurs take pride in how many
companies they have failed and how much money they have spent trying. Such a
view coincides with Silicon Valley’s innovation lifecycle as discussed at last
year’s conference by guest speaker James Isbester. In Canada, however, Marc
Castel found that failing is accompanied with stigma and that significant efforts
are made to avoid failing. Such an attitude, he feels, is dangerous and companies
should either succeed quickly or fail quickly. Failing slowly just takes resources
(R&D time and money) from other ideas and firms which have greater chances
of success.

1.5 EVALUATING REASONS FOR SUCCESS OR

FAILURE OF IP IN COMMERCIAL CONTEXT
Like any other commercial product there are lots of reasons that could be
contributed to the success or failure of intellectual property in commercial context.
As is evident from the examples in 1.1.3 and 1.1.4, the success or failure is not
limited to the quality of the product on which the IP is based or the service
provided under that IP. There could be factors as disparate as cultural differences,
social hierarchies, political situation, economic climate, the climate per se, the
competition in the market as well as the quality of the product sold under a given
intellectual property.

9
Introduction to It goes without saying that every venture must be preceded with a due diligence.
Commercialization
This due diligence must be carried out not only of the market and the prevailing
environment without, but also the strategy and weaknesses prevailing within the
organization that seeks to market their IP. The strategy planning for
commercialization of IP begins with an IP audit which has been described in
detail in Bock 4. This must be followed by strategic planning which has been
described in detail in Block 3. The due diligence preceding the commercialization
of IP will include due diligence on potential business partners, conducting a
freedom-to-operate search while commercialization strategy could include market
analysis pricing strategies, branding and advertising strategies.

1.6 SUMMARY
Let us sum up what we have studied in this Unit.
• We have started from the introduction which provides the basic concept and
also the significance of commercialization of IP which has to be strategic,
planned and marketed.
• The example of such successful and failure story of such commercialization
have been discussed later which the accomplished in the market of the IP
commercialization is due to the well determination on the value of a product
and the well established market mechanism. Also the failure in the IP
commercialization is due to various reasons i.e. poor execution of the
concept, inadequate publicity, lack of support material / services on
commercial scale, a strong lobby against the launch of the product etc.
• Lastly we have examined on the evaluation reasons for being success or
failure in IP commercialization. The reasons for that may vary from cultural
differences, social hierarchies, political situation, economic climate, the
competition in the market as well as the quality of the product sold.

1.7 SELF ASSESSMENT EXERCISE

1) What do you understand by commercialisation of IP?
2) What is the significance of commercialisation of IP?
3) What points must be remembered before starting of commercialisation of
IP?

1.8 REFERENCES AND SUGGESTED READINGS

1) Rembrandts in the Attic: Unlocking the Hidden Value of Patents by Kevin
G. Rivette and David Kline
2) Edison in the Boardroom: How Leading Companies Realize Value from
Their Intellectual Assets by Julie L. Davies and Suzanne S. Harrison
3) Profiting from Intellectual Capital by Patrick H. Sullivan

10
 Sogmofocamce pf
UNIT 2 PROTECTING YOUR IP RIGHTS Commercialization to IP

Structure
2.1 Introduction
2.2 Creation of Intellectual Property (IP)
2.3 Protecting your IP Rights
2.4 Under the Relevant Statutes
2.5 Territorial Nature of IP Protection
2.6 Protecting your IP Rights through Relevant Treaties
2.7 Summary
2.8 Self Assessment Exercise
2.9 References and Suggested Readings

2.1 INTRODUCTION
An intellectual asset is a creation of the mind and includes inventions, artistic
works, literary works, logos, trade names, trade secrets, designs, etc. These
intellectual assets have great significance in commerce and provide distinct
competitive advantage over business rivals. Because of their importance in
commerce and their role in nation-building, many have formally given these
assets a legal status that of a “property” provided they meet the legal criteria laid
out under specific laws such as patents laws, copyright laws, trademark laws,
etc.

Once an intellectual asset is granted protection under the said specific laws and
takes on the mantle of being an intellectual property, it takes on the same status
as that of a tangible property such as machinery, goods, and real estate. And just
like any tangible property, the intangible can be bought, sold, licensed, and
mortgaged. In short, it can be treated exactly the same way as a tangible property.
Just as the concept of ownership is critical to the concept of tangible property
with the accompanying right to alienate the property, the same concept applies
to intellectual property as well.

Example: In fact, it did get affected as a tangible property during World War I
and II. “Aspirin” the trademark owned by Bayer for acetylsalicylic acid lost its
trademark status along with its physical real estates and other properties when
it was confiscated by USA and Canada during World War I. Its trademarks were
acquired by Sterling Drug, a US based pharmaceutical company, later known
as Stering-Winthrop. In fact, during World War II, the office of the Alien Property
Custodian (APC) under the US Government seized thousands of foreign owned
intellectual property including patents and disseminated the information therein
to American companies presumably for use in war effort.

In case, the intellectual asset cannot be protected by way of conversion into an

intellectual property as it does not fulfil the criteria laid out under the law, the
intellectual assets continue to be an asset of the company, for instance, the pricing
strategies adopted by a company to market its products in different countries
may not be protectable as a copyright, but may be a good trade secret and,
11
Introduction to therefore, an asset of the company. Other examples of a company’s intellectual
Commercialization
assets are their client list, information on sourcing of raw materials, man-
management, technical know-how, etc.

2.2 CREATION OF INTELLECTUAL PROPERTY

(IP)
• Statutory: In the case of statutory IPR, the government grants a period of
exclusivity to the creator of intellectual property as a reward for creating/
innovating. The period of exclusivity is accompanied by various conditions
depending on the type of intellectual property. Any person who wishes to
use the intellectual property has to obtain the consent of intellectual property
right holder, failing which the right holder can file a suit for infringement
and pray the court to grant an injunction, damages and/or account of profits.
The statutes clearly lay down their rights and remedies available to the right
holder. Most IPR infringement remedies are by way of a civil action, though
in some instances such as copyright, there may be criminal remedies as
well.
• Common law rights: The remedies are usually civil action.

2.3 PROTECTING YOUR IP RIGHTS

• Under the relevant statutes - World Intellectual Property Organization
defines Intellectual Property as legal rights that result from intellectual
activity. The intellectual activity may include any activity in the industrial,
scientific, literary and artistic fields. According to the Centre for Intellectual
Property Rights in India, the major Indian Intellectual properties typically
fall into 4 major buckets; Copy Right, Patent, Trademark and Design
Protection.
• Territorial Nature of IP Protection - Intellectual Property Rights laws are
territorial in nature i.e. they only provide protection in the countries in which
they are registered. They are determined and enforced by the nation in which
one resides. For example if a patent is granted in India only and not in US,
the applicant can only stop the use of such patented invention in India and
not in US.

2.4 PROTECTING YOUR IP RIGHTS THROUGH

RELEVANT TREATIES
• Paris Convention for the Protection of Industrial Property - The Paris
Convention for the protection of Industrial Property was signed in Paris,
France on March 20, 1883 and is one of the first intellectual property treaties.
The Paris Convention was originally signed by 11 countries but as on October
2008 it has 173 members. India became party to the Paris Convention on
December 7, 1998. The Convention is administered by the World Intellectual
Property Organisation (WIPO).
The Convention applies to industrial property in the broadest sense, including
patents, marks, industrial designs, utility models, trade names, geographical
indications and the repression of unfair competition. The Convention
12
 provides for national treatment, right of priority and common rules to its Protecting Your IP Rights
members.

Under the provisions on national treatment, each contracting state must grant
same protection of industrial property to nationals of other contracting states, as
it provides to its own nationals.

The Convention provides for right of priority which means that on the basis of
first application filed in a member country, the applicant may within a period of
12 months (in case of patents) and 6 months in case of marks and industrial
designs, may apply for protection in any other contacting state. These applications
filed on a later date will be deemed to be filed on the same date as the first
application.

The third provision of the Convention is that all the members must follow certain
common rules. Few important rules are as follows:
a) Patents: Patent rights are territorial. Grant of a patent may not be refused or
a patent may not be cancelled in a contracting state on the grounds that it
has been refused or annulled in any other contracting state. Inventors retain
the right to be named in a patent. Contracting states may grant compulsory
license but only with certain limitations.
b) Marks: The Convention does not regulate the conditions for filing and
registration of marks. Each contracting state must refuse registration and
prohibit the use of marks which are likely to cause confusion. Collective
marks must be granted protection.
c) Industrial Designs: Designs must be protected in each contracting state
and protection cannot be denied on the grounds that the article incorporating
design is not manufactured in the state.
d) Trade Names: Protection must be granted without the obligation of
registration.
e) Indications of Source: Direct or indirect use of a false indication of the
source of the goods or the identity of the producer, manufacturer or trader
must be prohibited.
f) Unfair Competition: Each contracting state must provide protection against
unfair competition.

The Convention is open to all states. The instruments of accession have to be

submitted to the WIPO.
• Berne Convention - The Berne Convention for the Protection of Literary
and Artistic Works, commonly known as the Berne Convention, is an
international agreement relating to copyright, which was signed in Berne,
Switzerland in 1886. 164 nations are members of this convention as on
October 2008. India became party to this convention on April 1, 1928.
The Convention determines the minimum protection to be granted relating
to the works and rights to be protected, as well as special provisions available
to developing countries which want to make use of them.

13
Introduction to The three basic principles on which the convention is based are as follows:
Commercialization
1) Principle of national treatment
2) Principle of automatic protection i.e. unconditional protection
3) Principle of the independence of protection i.e. protection is independent of
the existence of protection in the country of origin of the work

The minimum standards of protection relating to the works and rights to be

protected, and the duration of the protection are as follows:
a) Works: The protection must include “every production in the literary,
scientific and artistic domain, whatever may be the mode or form of its
expression”.
b) Subject to certain exceptions, the rights which must be recognized as
exclusive rights of authorization are as follows:
• the right to translate,
• the right to make adaptations and arrangements of the work,
• the right to perform in public dramatic, dramatico-musical and musical
works,
• the right to recite in public literary works,
• the right to communicate to the public the performance of such works,
• the right to broadcast ,
• the right to make reproductions in any manner or form,
• the right to use the work as a basis for an audiovisual work, and the
right to reproduce, distribute, perform in public or communicate to the
public that audiovisual work.
The Convention also provides for “moral rights”, that is, the right to claim
authorship of the work and the right to object to any deformation or other
modification of, or other derogatory action in relation to, the work which
would be prejudicial to the author’s honor or reputation.
c) Duration of protection: The protection must be granted until the expiration
of the 50th year after the author’s death. However, there are certain exceptions
to this general rule. In the case of anonymous works, the term of protection
expires 50 years after the work has been lawfully made available to the
public. In the case of audiovisual (cinematographic) works, the minimum
term of protection is 50 years after the release of the work. In the case of
works of applied art and photographic works, the minimum term is 25 years
from the creation of such a work.
• Trade-Related Aspects of Intellectual Property Rights (TRIPS) - The
agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPS
as it is commonly known, is an international agreement administered by
WTO. It was negotiated in the Uruguay Round (1986-94) and introduced
intellectual property rules into the multilateral trading system for the first
time. The TRIPS agreement came into effect on January 1, 1995. It covers
areas of intellectual property rights like copyright and related rights (i.e. the
rights of performers, producers of sound recordings and broadcasting
14
 organizations); trademarks including service marks; geographical indications Protecting Your IP Rights
including appellations of origin; industrial designs; patents including the
protection of new varieties of plants; the layout-designs of integrated circuits;
and undisclosed information including trade secrets and test data.

The TRIPS agreement applies to all World Trade Organization (WTO) members.
The TRIPS agreement allows different countries to apply its provisions at different
times. Developed countries were granted a transition period of one year i.e. until
1st January 1996. Developing countries were allowed a further period of four
years i.e. until 1st January 2000. Least developed economies were granted a longest
transition period of eleven years i.e. until 1st January 2006.

TRIPS also specify enforcement procedures, remedies, and dispute resolution

procedures. Apart from non-discrimination features, TRIPS has an additional
important principle that the intellectual property protection should contribute to
technical innovation and the transfer of technology and both producers and users
should benefit, and economic and social welfare should be enhanced. The TRIPS
Council comprises all WTO members. It is responsible for monitoring the
operation of the agreement, and, in particular, how members comply with their
obligations under it.

All members have to comply with obligations on national treatment (i.e. equal
treatment for foreign and domestic individuals as well as companies) and most-
favoured-nation treatment (non-discrimination between foreign individuals and
companies).

Special transition rules applied in case of developing countries where it does not
provide product patent protection in a particular area of technology, those countries
were granted an additional period of five years. Thus in developing countries
like India, where product patents were not granted, and TRIPS Agreement came
into force on 1st January 1995, it had time up till 10 years i.e. 1st January 2005 to
introduce the protection. But for pharmaceutical and agricultural chemical
products, the country must accept the filing of patent applications from the
beginning of the transitional period, i.e. from 1st January 1995, even though the
decision on whether or not to grant any patent itself need not be taken until the
end of this period. This is known as the “mailbox” provision. If the government
of that particular country allows the relevant pharmaceutical or agricultural
chemical product to be marketed during the transition period, it has to, subject to
certain conditions, provide the patent applicant an exclusive marketing right
(EMR) for the product for five years, or until a decision on granting a product
patent is taken, whichever is shorter.

The TRIPS agreement requires members to comply with certain minimum

standards for protection of intellectual property rights covered in it. The agreement
also allows compulsory licensing and government use of a patent without
authorization from its owner.
• Patent Cooperation Treaty (PCT) - The Patent Cooperation Treaty (PCT),
an international treaty administered by WIPO, was concluded in 1970. It is
open to the members of the Paris Convention for the protection of Industrial
Property. As on January 14, 2010, it has 142 states as its members. India
became party to the treaty on December 7, 1998.
15
Introduction to The treaty provides patent protection for an invention simultaneously in each of
Commercialization
its member nations by filing a single application instead of several separate
national applications. The granting of patent remains under the control of a
national patent office, this is known as “national phase”.

Briefly an outline of PCT procedure includes filing of an application followed

by international searching conducted by the International Searching Authority
(ISA), which includes world’s major patent office including India and issuance
of an international search report. Based on this report, the applicant may either
continue further or may withdraw his application. If not withdrawn, it is published
by the International Search Bureau. The application can then be examined by
International Preliminary Examination Authority (IPEA), on request. After the
end of the PCT procedure, the application enters the national phase.

The treaty is used by the world’s major corporation; research institutions,

universities, etc. as well as the small and medium sized enterprises likewise,
when they seek international patent protection. The procedure under the treaty
has some great advantages for the applicant, general public and the patent office.
These advantages are as follows:
a) The applicant has 18 more months than otherwise to appoint local patent
agents in each foreign country, to prepare necessary translations and to pay
national fees.
b) The search and examination work of national patent offices is considerably
reduced owing to the international search report, written opinion and
international preliminary report issued by the International Bureau.
c) The international application cannot be rejected by any patent office on formal
grounds.
d) On the basis of international search report and written opinion the probability
of invention being patented can be evaluated.
e) International application can be amended based on the findings of
international preliminary report before processing by various patent offices.
f) Since each application is published with international report, third parties
are in a better position to form an opinion on the claimed.
g) International publication is an effective means of advertising and looking
out for potential licensees.
• WIPO Performances and Phonograms Treaty (WPPT) - The WIPO
Performances and Phonograms Treaty (or WPPT) is an international
treaty signed by the member states of the World Intellectual Property
Organization. It was adopted in Geneva on December 20, 1996. The treaty
entered into force on May 20, 2002. As on 14th December 2009 86 nations
are party to this Treaty. India is not a member of this Treaty.

The Treaty deals with intellectual property rights of performers (actors, singers,
musicians, etc.) and producers of phonograms (the person who fixes the sounds).
The treaty provides for “national treatment” to them. The term of protection
must be at least 50 years.

16
The Treaty grants performers four kinds of economic rights in their performances Protecting Your IP Rights
fixed in:
i) the right of reproduction (i.e. direct or indirect reproduction of the phonogram
in any manner or form)
ii) the right of distribution (i.e. making available to the public of the original
and copies of the phonogram through sale or other transfer of ownership),
iii) the right of rental (i.e. the commercial rental to the public of the original and
copies of the phonogram), and
iv) the right of making available (i.e. making available to the public, by wire or
wireless means, of any performance fixed in a phonogram, in such a way
that members of the public may access the fixed performance from a place
and at a time individually chosen by them).

The Treaty grants three kinds of economic rights to performers in respect of their
unfixed or live performances:
i) the right of broadcasting,
ii) the right of communication to the public, and
iii) the right of fixation.
The Treaty also grants performers moral rights.

Further, the Treaty grants four kinds of rights to producers of phonograms:

i) the right of reproduction
ii) the right of distribution,
iii) the right of rental, and
iv) the right of making available.
• WIPO Copyright Treaty (WCT) - The WCT is a special agreement under
the Berne Convention. The Treaty aims to provide adequate solutions to
the questions raised by new economic, social, cultural and technological
developments. The Treaty further aims to recognize the impact of the
development of information and communication technologies on the creation
and use of literary and artistic works. The Treaty entered into force on March
6, 2002. As on 14th December 2009, 88 countries are party to the Treaty.
India is not a signatory to this Treaty.
The Treaty provides copyright protection on the following subject matter:
i) computer programs, whatever may be the mode or form of their expression,
and
ii) compilations of data or other material, “databases”, in any form, which are
result of intellectual creation.
The Treaty provides the following rights to the authors:
i) the right of distribution,
ii) the right of rental, and
17
Introduction to iii) the right of communication to the public.
Commercialization
The Treaty obliges the Contracting Parties to provide legal remedies against the
circumvention of technological measures (e.g., encryption) used by authors in
connection with the exercise of their rights and against the removal or altering of
information, such as certain data that identify works or their authors, necessary
for the management (e.g., licensing, collecting and distribution of royalties) of
their rights (“rights management information”).
• Hague Agreement Concerning the International Registration of
Industrial Designs - The Hague Agreement Concerning the International
Deposit of Industrial Designs was signed in 1925 and entered into force in
1928, and was subsequently revised several times. As on 3rd June 2010, 56
member States are party to the Agreement. India is not a signatory of this
agreement. The agreement aims at providing a mechanism for securing
protection of an industrial design in all the member countries by means of
international deposits. The duration of protection was 15 years from the
date of deposit.
The Hague Agreement is constituted by three different Acts - the Geneva (1999)
Act, The Hague (1960) Act and the London (1934) Act. They are jointly referred
to as “the Hague system”.
Under this system, the owner of an industrial design can apply for protection in
several countries by filing one application with the International Bureau of WIPO,
in one language, with one set of fees in one currency (Swiss Francs). An
international registration has the same effects in each of the designated countries
as if the design had been registered there directly.
The Hague System simplifies greatly also the subsequent management of the
industrial design, since it is possible to record subsequent changes or to renew
the registration through a simple single procedural step with the International
Bureau of WIPO.
The International agreements in the area of IPR are tabulated below:

S. Type of IPR Name of the Date of the Total Contracting India – Entry into
No Agreement Agreement Parties signa- Force by India
(as on date) tory
Paris Convention for 20th March 1883 173 7th December
1 IPR Y
the Protection of (amended in 1998
Industrial Property 1979)
2 Agreement on Trade- 1st January All WTO 1st January
Y
Related Aspects of 1995 Members 2005
Intellectual Property
Rights (TRIPS)
3 Patents Patent Cooperation 19th June 1970 142 (as on 14th Y 7th December
Treaty (PCT) (modified on 3rd January 2010) 1998
October 2001)
Budapest Treaty on 28th April 1977 73 (as on 29th Y 17th December
4 the International (amended on 26th April 2010) 2001
Recognition of the April 1980)
Deposit of Microor-
ganisms for the
Purposes of Patent
Procedure (Budapest
Treaty)
18
 Protecting Your IP Rights
5 Patent Law Treaty 1st June 2000 25 (as on 12th N NA
March 2010)
6 Designs Hague Agreement 1925 (as 56 (as on 3rd June
N NA
Concerning the amended in 2010)
International Registra- 1999)
tion of Industrial
Designs
Lisbon Agreement for 31st October 26 (as on 15th N
7 NA
the Protection of 1958 (as October 2009)
Appellations of Origin amended on 28th
and their International September
Registration 1979)
Geographical
Indications Madrid Agreement for 14th April 1891 35 (as on 15th
N NA
the Repression of False October 2009)
8 or
Deceptive Indications
of Source on Goods
9 Madrid Agreement 14th April 1891 56 (as on 31st May N NA
Concerning the (as amended on 2010)
International Registra- 28th September
tion of Marks 1979 )
10 Protocol Relating to 27th June 1989 82 (as on 31st May 8th February
Y
Trademarks the Madrid Agreement (as amended on 2010) 2007
Concerning the 12th November
International Registra- 2007)
tion of Marks (Madrid
Protocol)
Singapore Treaty on 27th October
11 21 (as on 21st June N NA
the Law of Trademarks 1994 2010)
Trademark Law Treaty 27th October 45 (as on 18th N
12 1994 June 2010) NA
Berne Convention for 9th September 164 (as on 15th Y 1st April 1928
13 the Protection of 1886 (as October 2009)
Literary and Artistic amended on 28th
Works Sept. ‘79)
Copyright Convention for the 77 (as on 15th Y
29th October 12th February
Protection of Producers 1971 October 2009) Y
1975
of Phonograms Against 91 (as on 15th N
Unauthorized Duplica- N Signed on 26th
October 2009))
tion of Their Phonograms 26th October Y October 1961
(Phonograms Conven- 1961 88 (as on 14th Dec.
NA
tion) 2009)
NA
International Conven- 20th December 86 (as on 14th
tion for the Protection 1996 December 2009) _
of Performers, 10
14 Producers of Phonograms 20th December
15 and Broadcasting 1996
Organizations (Rome
16 Convention)
26th May 1989
17 WIPO Copyright (not yet in force)
18 Integrated Treaty (WCT)
Circuits WIPO Performances
and Phonograms
Treaty (WPPT)
Treaty on Intellectual
19
Property
in Respect of Inte-
grated Circuits
(Washington Treaty)
Introduction to
Commercialization 2.7 SUMMARY
• In this Unit we have explained on the protection of Intellectual property (IP)
which is creations of the human intellect and it can be protected under the
law.
• Thus as the owner of the intellectual property rights, others who wish to use
the intellectual property has to obtain the consent of intellectual property
right holder, failing which the right holder can file a suit for infringement
and pray the court to grant an injunction, damages and/or account of profits.
• Moreover we have mentioned the territorial protection of intellectual property
rights which usually they can be protected only in the countries in which
they are registered.
• However being the contracting member of the International Organisation
such as Paris Convention which has the provision on national treatment,
each contracting state must grant same protection of industrial property to
nationals of other contracting states, as it provides to its own nationals.

2.8 SELF ASSESSMENT EXERCISE

1) Define Intellectual assets.
2) How can intellectual property be protected?
3) Explain PCT, TRIPS and WPPT in not more than 200 words each.

2.9 REFERENCES AND SUGGESTED READINGS

Website of World Intellectual Property Organisation (WIPO) – www.wipo.int

20
 Protecting Your IP Rights
UNIT 3 INTRODUCTION TO IP AS A
BUSINESS TOOL
Structure
3.1 Types of IP
3.2 Traditional IP Rights
3.3 Types of IP (Evolving IP Rights)
3.4 Summary
3.5 Self Assessment Exercise
3.6 Reference and Suggested Readings

3.1 TYPES OF IP
Today, a review of intellectual property would require an understanding of
evaluation of intellectual property in order to classify according to the rights and
duties of the various stakeholders in the intellectual property regime. Broadly,
intellectual property may be classified into two classes:
a) Traditional IP rights
b) Evolving IP rights

3.2 TRADITIONAL IP RIGHTS

Since the 15th century or earlier the evaluation of intellectual property indicates
the identification of essentially four types of intellectual property rights that could
be granted on the basis of intellectual/creative developments. These four
intellectual properties are patents, trademarks, copyrights and related rights and
industrial designs while copyright and related rights were considered to be a
separate genre of intellectual property rights, patents, trademarks and industrial
design were clubbed under a common “industrial rights”. Today, after the
acknowledgement of trade related aspects of intellectual property and signing of
multilateral treaties by majority of countries around the world, all intellectual
property rights have today been identified as seven in number, of which, the
traditional IP are patents, trademarks, copyrights and industrial designs. A brief
overview of each of these is given below:
• Patent: A patent is a right provided under Patent Law of a country as in
case of India or by an Intergovernmental Organization as in case of the
European Patent Office (EPO) or ARIPO. In exchange the Patent Law
demands that the working of the invention and the best mode for working
the invention be disclosed in a patent document (patent specification) to be
made available to the public.

Patents are granted for inventions that fulfil the criteria of novelty, inventive
step and industrial applicability. In India, the criteria of patentability is defined
under sections 2(1)(j), 2(1)(ja) and 2(1)(ac) of The Patent Act, 1970 as amended
by the Patents (Amendments) Act 2005. These criteria must be read with the
limitations enumerated in chapter 2 of the Patents Act which comprises the
21
Introduction to Sections 3 and 4. Section 5 which stated that only process patents would not be
Commercialization
granted to inventions relating to drugs, medicines, food and chemical was
abrogated by the amendment of 2005. Patents can be granted for simple inventions
also, the invention need not be always complex, for example:
In the 1940’s, on returning home after walking his dog in the mountains, Swiss
inventor George de Mestral noticed that his dog and his pants were covered
with seed called ‘burrs’. On taking a closer look at the seeds under the
microscope, he recognized the potential for a new fastener based on the natural
hook-like shapes on the surface of burrs. After over eight years of trial and
error, he finally realized that nylon when sewed under infrared light formed
tough hooks for the burr side of the fastener. He patented it in 1955. This is how
Velcro was born. The inventor established Velcro industries to manufacture
products that were based on his patented invention.
Once granted, the patent holder has an exclusive right - to exploit his patent such
as to make, use, sell or distribute the patented product or process, in the territory
where the patent is granted and, to control the exploitation of his patented
invention for a given period, usually 20 years. A person must obtain consent or a
licence from the patent holder if he wants to use the invention in a territory
where the patent is in force. Failure to obtain consent will amount to infringement
of the patent right. However, there are certain exceptions to patent rights in
which there will be no infringement action. These exceptions to patent right
vary in different countries and jurisdictions.
• Trademarks - A trademark is a visual symbol in the form of word, device
or a label applied to goods or services. A trade mark helps to identify the
manufacturer or seller of goods or services to the customer. Depending on
the types of goods and services on which the protection is sought, the trade
mark may be applied for registration under the appropriate classes as laid
out in the NICE agreement. In case a trade mark is not registered, a protection
from unauthorized use may still be sought under the common law provided
the owner of the unregistered trade mark can prove that his business is
identified with the trade mark by the customers. Some common examples
of trade mark are Google (word), KFC (letters), Swoosh of Nike (drawing),
the Coca Cola bottle (shape), the Mercedes Benz logo (symbols) and Black
& Gold of Duracel batteries (colours).

Non conventional trademarks such as advertising slogan (just do it!) of Nike,

sounds (“Tada”) of Microsoft during start of uploading of the Operating system
and look & feel of business establishment such as Pizza Hut may also be protected
as trade dress.
• Copyright - Copyright is an exclusive right afforded to the author of a literary
or artistic work to protect his work from unauthorized copying for a limited
period of time. Copyright protects literary, musical, dramatic, choreographic,
architectural, pictorial, graphic and sculptural works.

Though a copyright protection is granted for the original work of an author,

however it is not necessary that the work be of original or inventive in nature.
More than the originality in the ideas, it is the expression of ideas and thought on
a tangible media such as paper, in print, as a sound recording, etc. The law does
not require that the expression of the idea to be in a novel form but that it should
22 not have been copied from another author.
In India, copyright is legally protected under the Copyright Act, 1956 and provides Sogmofocamce pf
Commercialization to IP
protection for the life of the author plus 60 years. Copyright is not a single right
but a bundle of rights. Apart from the right to copy, the Copyright Act affords the
author with a bundle of rights such as adaptation rights, translation rights,
performing rights, moral rights, etc, as enshrined in Section 14 thereof.

A copyright in a work exists from the time it is expressed in a media, and the
author has all rights in his work which are enforceable. However, for evidentiary
purposes, it is better to record the same at the Copyright Office.

Example: © WIPO 1998 – 2010 – For a work that is constantly updated, such as
materials on website, it is possible to include the years from the time of first
publication to the present.

The categories of work that are protected are - literary or dramatic work of an
author; artistic work other than a photograph; photograph of the photographer;
cinematograph film of the producer; the sound recording of the producer; musical
work of a composer; all literary, dramatic, musical or artistic work on the computer
by the person who causes the work to be created.

To clarify, the term author mentioned above refers to the person who actually
created the copyrightable matter though the work may have been commissioned
or suggested by another. If the person who has got the work to be created by
suggestion wants to acquire the copyright in the subject matter, he may do so by
executing a deed of assignment of rights. However, even though the assignment
will transfer all the rights from the assignee to the assigner, the law ensures that
the moral rights remain with the person who is the creator and who has assigned
the rights.
• Industrial Design - Designs or industrial designs are given to the ornamental
and aesthetic aspects of a product. It refers to the features of shape,
configuration, pattern or composition of lines or colours applied to any
product. The protection is given only to the appearance of a product as
visible to the naked eye. The technical and functional features of a product
are not the subject matter of the industrial design protection. For instance,
the shape of a pen, the groves on the body of the pen, the design of a car, its
headlights, its tail lamps, the shape of the keyboard of your computer, etc,
are all examples of industrial design.

In India, industrial designs are protected under the Designs Act, 2000. A
registration under this Act protects the owner from unauthorised copying or
imitation by third parties. This includes the right to exclude unauthorised persons
from making, offering, importing, exporting or selling any product in which the
design is incorporated or to which the design is applied.

Owner of any new or original design not previously published in any country
and which is not contrary to public order or morality can apply for protection at
the Indian Patent Office. The term of design protection is 10 years from the date
of registration, renewable for the further period of five years.

If a product has both aesthetic appeal as well as technical functions, the protection
can be sought for both under designs as well as patents. For example, Duracell
was a company manufacturing alkaline batteries until 1980s. In 1981, it employed
23
Introduction to consultant designers to produce a pocket flashlight, which was launched shortly
Commercialization
after, in 1982. Two years later, the design of the flashlight won the United Kingdom
Design Council Award. The innovative functional features of the product are
protected by patents, while the design has been protected in all the major countries
where Duracell currently trades.

In order to be registered as an industrial design, it must fulfil the criteria of

novelty, originality, must not be obscene or of mere mechanical contrivance,
must be capable of industrial application and should have an individual character.

24
 Introduction to IP as a
3.3 EVOLVING IP RIGHTS Business Tool

In the last 50 years, a number of intellectual property rights have evolved in

areas as diverse as geographical indications that are evocative of a geographical
region resulting in particular types of goods and agricultural produce to rights of
plant breeders in new hybrids and varieties, domain name and layout designs in
integrated circuits. These rights can be very briefly enumerated as
• Trade Dress
• Domain Name
• Geographical Indication
• Plant Readers Rights
• Semi Conductor Integrated Circuit Layout Designs
• Protecting Trade Secret as an Intellectual Asset
• Trade Dress - One of the interesting forms of intellectual property accorded
a form of protection under common law is that of trade dress. Trade dress
refers to the overall getup of the product or service or both. Protection is
afforded to the overall image created and includes features such as size,
shape, package, colour combinations, textures, graphics, forms or service
or even particular sales techniques that identify a product/service with its
creators in the mind of the consumers. The creators/rights holders in the
trade dress must prove that the average consumer would likely be confused
as to origin of the product/service or both if another product/service were
allowed to appear in similar dress.

A generic idea or concept such as an ordinary or common place exterior or interior

retail building design that is shared by many competitors cannot be considered
as a trade dress. Further, along with the quality of being evocative of a particular
quality, trade dress must also be non-functional in order to be legally protected
under the common law.

Unlike traditional trademark law that protects words or logos, trade dress law
protects the total packaging and design of a product or a service or both. Although
the new legal definition of trademark in India broadly includes all the elements
of trade dress yet the Indian Act do not allow the registration of trade dress. It is
however interesting to note that the Trade Marks Act, 1999 now affords protection
to shape marks and colour combinations as marks. Thus, a product package which
could include colour combination, size, shape, etc, may be registrable as a trade
mark. However, the remedy passing off under common law continues being an
alternative for protecting unregistered trade dress.

For instance, the interiors of the McDonald’s, the packaging of Colgate

toothpaste, the curvy shape of the Coca Cola bottle, the cover-design of a
magazine such as the “Times” or the “National Geographic” are all forms of
trade dress. Front grill of the Rolls Royce automobile; Shape of a classic Ferrari
sports car; Round wall thermostat by Honeywell; Buffet Crampon’s stylistic
symbol are all forms of trade dress.
• Domain Name: The internet uses the domain name system (DNS) to allow
users to access websites and online resources using domain names, such as
www.icann.org instead of all-numeric IP addresses such as 192.0.34.65 for
25
Introduction to the same website. Domain names are comprised of at least two parts – the
Commercialization
top-level domain (TLD) and the second level domain. The TLD is the label
to the far right in the domain name, such as .com, .org, .net, .biz and .gov.
TLDs fall into two main categories: country-code TLDs (ccTLDs) and
generic TLDs (gTLDs).

The main role of domain name is to provide an address for computers on the
Internet. However, with time, it is also being used as a business identifier. The
business owners have started using their trade names or trademarks as their domain
names. The domain names require worldwide exclusivity. The registration of
domain name is provided on a first-come-first-served basis.

The owner of a well known trademark may find his mark being used as a domain
name by some other person. Therefore, the owners of many trademarks, especially
well-known ones, have registered domain names a large number of variants of
their most valuable well-known trademarks, so as to avoid problems of trademark
infringement, and also to assist customers to reach the correct website.

The domain names are internationally regulated through WIPO and Internet
Corporation for Assigned Names and Numbers (ICANN). The ICANN also looks
after the dispute resolution under the Uniform Domain Name Disputes Resolution
Policy (UDNDR Policy).

In India, the provisions of the Trademarks Act, 1999, provide protection to the
trademarks of a person, if they are used unauthorized as a domain name. The Act
allows the owner of the registered trademark to avail the remedies of infringement
and passing off.
• Geographical Indications: Geographical indication (GI) is a term that
encapsulates the geographical value of goods that are evocative of a
geographical origin or a process traditionally practiced in the geographical
region. While it is similar to a trade mark in that the GI helps to identify the
goods to the consumer, it is very different in a number of ways. For instance,
while a trade mark may be owned by a single person privately, geographical
indication is a community right. Similarly where a trade mark may be sold
or licensed to a third party, a GI can never be a licensed or assigned. It
continues to be with the community, giving them a right to claim authentic
production of the goods.

Some examples of famous geographical indications are the Basmati Rice, the
Darjeeling tea, the Kashmir Pashmina, the Champagne and Scotch whisky.
• Plant Breeders’ Rights: As a signatory to the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS Agreement), India fulfilled
its obligations to Article 27 by passing a sui generis system of protection of
plant varieties. The Protection of Plant Varieties and Farmers’ Rights Act,
2001 (PPV & FR Act) provides protection to new varieties and hybrids of
plants. Introduction of farmers’ rights is a unique step as the farmer who
has bred or developed a new variety shall be entitled for protection under
the Act in the same manner as a breeder of a variety. Incidentally, the PPV
& FR Act ascribes rights to researchers as well as farmers and breeders.

26
Under this Act, the Plant Variety Authority has notified crops that can be protected. Introduction to IP as a
Business Tool
Applications are filed at the Plant Variety Authority presently based in New Delhi.
As on 1st August 2010, the Authority has notified several crops including black
gram, cotton, black pepper, green gram and kidney bean/French bean for
protection. There are more crops like potato, onion, brinjal, cauliflower and
rose awaiting notification.

Under farmers’ rights, a farmer who is engaged in the conservation of genetic

resources of land races and wild relatives of economic plants and their
improvement through selection and preservation and if the material has been
used as donors of genes in varieties registered under this Act shall get a reward
from the Gene Fund instituted under the Act. At the same time, farmers shall be
entitled to save, use, sow, re-sow, exchange and share or sell his farm produce
including seed of a protected variety in the same manner as he was entitled before.

The Plant Variety Authority grants exclusive rights to the breeder (in India, the
definition of “breeder” includes the farmer also) of a registered variety. The
period of protection is dependent on plant whose variety is to be registered. If
the plant is a tree or a vine then the period of protection of its new variety is 18
years from the date of filing the application. In case of crops, new varieties may
be protected for a maximum period of 15 years. A variety is registered if it
fulfills the criteria of novelty, distinctness, uniformity and stability.

Any breeder of the variety, farmer or group of farmers, any university or publicly
funded agricultural institution which is the breeder of the variety can apply for
the registration of the plant variety. Moreover, the application for registration
can be made either in person or through an agent. The breeder has to submit the
seeds or the propagating material including parental line seeds of the variety for
which protection is sought.
• Semiconductor Integrated Circuits Layout Design: A semiconductor
integrated circuit is a product having transistors and other circuitry elements,
which are inseparably formed on a semiconductor material or an insulating
material or inside the semiconductor material and designed to perform an
electronic circuitry function. India protects the intellectual property under
the Semiconductor Integrated Circuits Layout-Design Act, 2000 (hereinafter
known as the “Act”), along with the Semiconductor Integrated Circuits-
Layout Design Rules, 2001. Registering the layout-design under the Act
gives the rights holder the exclusive right to the layout-design and to obtain
relief in respect of infringement for unauthorized reproducing, importing,
selling, and distributing the IC layout design for commercial purposes.
Creation of another layout design on the basis of scientific evaluation of a
registered layout design by a third party is not an infringement.

The Act grants protection to the Layout-designs which are original and distinctive.
Any person who is claiming to be the creator of a layout-design and who is
interested in registering it has to apply in writing to the Registrar. The Registrar
may refuse the application or may accept it fully or subject to amendments.
Within fourteen days from the date of acceptance, the Registrar will advertise
the application. Within three months from the date of the advertisement of the
application, any person may oppose the application by providing written notice
and a fee to the Registrar. After hearing the parties and examining the evidence,
the Registrar will decide the opposition. 27
Introduction to If the application has been accepted and not opposed, or if opposed and the
Commercialization
opposition has been decided in the favour of the Applicant, then the Registrar
will register the layout-design. This registration is valid for a term of ten years
from the date of filing an application for registration or from the date of first
commercial exploitation anywhere in the world, whichever is earlier.
• Protecting Trade Secrets as an Intellectual Asset : While trade secrets
have been protected through generations, they are increasingly being
identified as an intellectual asset. A trade secret is a formula, practice,
process, design, instrument, pattern, or compilation of information which
is not generally known or reasonably ascertainable, by which a business can
obtain an economic advantage over competitors or customers. In some
jurisdictions, such secrets are referred to as “confidential information” or
“classified information”.

However, while all trade secrets are confidential information, the reverse is may
not be true. All confidential information need not be trade secrets. The precise
language by which a trade secret is defined varies by jurisdiction. However,
there are three factors that, although subject to differing interpretations, are
common to all such definitions. A trade secret is information that:
• is not generally known to the public;
• confers some sort of economic benefit on its holder such as a competitive
advantage (where this benefit must derive specifically from its not being
generally known, not just from the value of the information itself); and
• is the subject of reasonable efforts to maintain its secrecy.

Some examples of potential trade secrets are: a formula for a health drink; recipes;
a new invention for which a patent application has not yet been filed; business
plans and strategies; financial projections; marketing strategies and unpublished
promotional material; sales data; manufacturing techniques, list of clients, and
computer algorithms.

A company can protect its trade secrets (and confidential information) through
non-disclosure contracts and confidentiality clauses in agreements which survives
the termination clauses therein. Additional protection may also be sought by
way of non-compete contracts with its employees reasonably within the “restraint
of trade” clauses in the contract law and employment laws, including restraint
that is reasonable in geographic and time scope). The protection of trade secret
effectively allows a perpetual monopoly in secret information — it does not
expire as would a patent. The lack of formal protection, however, means that a
third party is not prevented from independently duplicating and using the secret
information once it is discovered.

An example of trade secret is the secret recipe of “11 herbs and spices” of
Kentucky Fried Chicken (KFC) kept in a bank vault. Only few people know it
and are contractually obligated to secrecy. The ingredients are mixed by two
different companies and are then combined elsewhere in a third company at a
separate location. To mix the final formula, a computer processing system is
used to blend the mixtures together. It is ensured that no one outside KFC has
the complete recipe.
28
The sanctioned protection of such type of information from public disclosure is Introduction to IP as a
Business Tool
viewed as an important legal aspect by which a society protects its overall
economic vitality. A company typically invests money, time and energy (work)
into generating information regarding refinements of processes and operations.
If competitors had access to the same knowledge, the first company’s ability to
survive or maintain its market dominance or market position and market share
would be impaired. Where trade secrets are recognised, the creator of knowledge
regarded as a “trade secret” is entitled to regard such “special knowledge” as
intellectual asset.

3.4 SUMMARY
• In this Unit we have studied clearly on the concept of each type of intellectual
property rights ranging from patent, trademark, copyright, industrial design,
trade dress, trade secret, domain name, semiconductor Integrated Circuits
Layout Design, Plant Breeders’ Rights, and geographical indication.
• We have learnt how to get the protection in each intellectual property right.
It is very important to follow the criteria in order to get the registration and
be protected under the law.
• The criteria in order to be registered and also the duration of protection
provided by law to the owner of such intellectual property right are different.
For example in the case of copyright, the protection will be provided to the
owner without the registration unlike other types of intellectual property
rights.

3.5 SELF ASSESSMENT EXERCISE

1) How many types of IP are there?
2) List out the types of IP.
3) Write a note on evolving IP.
4) Write a short note on Patents, Copyright, Trade dress, domain name and
plant breeder’s right.

3.6 REFERENCE AND SUGGESTED READINGS

1) Patent Law by P. Narayanan
2) Law of Trade Marks and Passing Off by P. Narayanan
3) Law of Copyright and Industrial designs by P. Narayanan

29
Introduction to
Commercialization UNIT 4 MECHANISMS FOR
LEVERAGING IP AS A BUSINESS
TOOL
Structure
4.1 Introduction
4.2 Leveraging IP Rights (IPR) - By way of Contractual Obligations
4.3 Leveraging IP Rights (IPR) - By other Means
4.4 Summary
4.5 Self Assessment Exercise
4.6 Reference and Suggested Readings

4.1 INTRODUCTION
IA and IP are of little or no use to an organization unless these are leveraged to
create value which may include the generation of wealth. Business strategies
these days increasingly include the use of IP and IA as a strategic tool to garner
clear, strong and leading market share. We have already seen the mechanisms
for protecting intellectual property rights in Unit 3. We shall now explore some
of the mechanisms for leveraging the IP and IA as a business tool.

1.4.2 Leveraging IP Rights (IPR) – By Way Of Contractual

Obligations
There are other ways to ensure that the intellectual property rights are correctly
practiced. These are by way of imposing contractual obligations which is also a
means of exerting control over the IP rights.

A contract is an agreement between two or more parties to comply with certain

terms and conditions usually pre-negotiated, for a consideration. A breach of any
of the condition is actionable. In the field of intellectual property rights an exercise
thereof these contracts may be in the form of an assignment or a license.
• Assignment: An assignment is a complete or partial sale of the rights over
intellectual property by the rights owner to another. In a complete assignment
all rights in a patent or a trade mark or any other intellectual property rights
are assigned to another party, the assignee for a consideration paid upfront
in a single lump sum or in a staggered manner till the entire deal is completed.
• Licenses, types of licenses: A license is an agreement between the right
owner i.e. the licensor and a third party, the licensee. In this mechanism,
the right owner retains control over his intellectual property and gives licensee
a limited right to use the intellectual property for a given period of time, on
expiry of which the rights revert back to the licensor. The licensee thereafter
ceases to have any further rights in the intellectual property. The consideration
for this kind of agreement is usually a periodic payment which may be a
single amount or a percentage of units sold. There are different kinds of
license agreements and these are considered in detail in unit 2.5.2 - License
30 as a Tool for Negotiation.
• Cross license: Two parties who owned one or more patents may cross license Mechanisms for Leveraging
IP as a Business Tool
their intellectual property which may or may not include monetary payment.
This is one of the many tools of the negotiations that a right holder may
adopt to optimize use or minimize cost. For example, In September 2003,
three pharmaceutical companies, Cambridge Antibody Technology,
Micromet AG and Enzon Pharmaceuticals, announced that they had signed
a non-exclusive cross-license agreement. In the agreement, all three parties
obtained substantial “freedom to operate” authorizing each other to use
some of their respective patented technology. This enabled them to conduct
research and develop a defined number of therapeutic and diagnostic
antibody-based products. Cross licensing as negotiation tool has been
described extensively in 2.5.2.
• Patent pool: As the name suggests patent pool is a licensing strategy which
pools together related patents in a given area of technology. This is
specifically pertaining to a form of intellectual property that is the patent.
This is a mechanism of pooling together patents as a single unit to facilitate
easy negotiations with consumers as well as to create benchmark in the
industries. Other forms of intellectual property may also be pooled, for
instance, copyright. However, the more visible and interesting forms of
pooling of intellectual property have been patents pool in technology specific
areas such as MPEG. A well-known example of a patent pool is that formed
by Sony, Philips and Pioneer for inventions that are essential to comply
with certain DVD Video and DVD-ROM standard specifications.Details of
patent pools have been given in Unit 2.5.3 – Patent Pools.
• Cartels & anti-competitive practices: While pooling of patents and
copyrights have been considered an effective way of reaching the technology
to the masses, there are often a danger of cartelization of monopolization of
the market which may verge on anti competitive practices. There are many
forms of anti competitive practices some of which have been enshrined in
the Competition Act as well as The Patents Act 1970 as amended by The
Patents Amendment Act 2005. Some of the more common practices for
controlling market by a cartel may be by way of price fixing, market
allocation, tying, grant backs and even cross licensing and pooling to keep
out competition. Anti competitive practices have been described in a separate
Block 2 Unit 7.

4.3 LEVERAGING YOUR IP RIGHTS (IPR) – BY

OTHER MEANS
As of now we have seen ways to protect intellectual property and retain control
over them by way of statutory protection for different forms of IP, common law
protection and contractual obligation. There is also another way to ensure that
your intellectual property is protected. These are by way of:
• Negotiations
• Defensive publications
• Technical disclosures
• Proactive measures including patent landscaping
31
Introduction to • Negotiations: Where there is a rampant copy of your intellectual property
Commercialization
to the extent that it comes into public domain and your right looks to become
a paper right, litigation may be a very expensive way to retain your intellectual
property from a public realm. In such situation negotiations may be a useful
tool to communicate intellectual property rights in your favour as well as to
obtain a mandatory license from the “infringer”. This may be seen as way
for educating the masses so that they are aware that a right exists and that
they are infringing the said right. Negotiation as a tool is crucial to ensure
that the intellectual property actually reaches the consumers for optimum
fee in an optimum market depending on the product or service and the market
segment it aims to serve the intellectual property right may veer from mass
consumption to selective life style consumption.
• Defensive publications: This is a strategy that an IP rights holder or an
inventor may adopt to prevent other people from getting an exclusive right
(patent) on a particular technology or an aspect of technology. It involves
disclosing an invention to the public in order to ensure that no one else can
patent it. As seen from an earlier Unit on Patents, a prerequisite for grant of
patent is that the invention must not be published anywhere in the world.
Defensive publication can be by way of provisional application filed,
published or abandoned, articles in technical journals, information on own
website or blogs, newspaper reporting and publication of technical journals
are an effective way to stop third party from creating private rights on the
technology. The disclosure should always be done in a well-recognized
technical journal or other publication that is likely to be consulted by patent
examiners when examining patent applications. Defensive publication
should never be done for a breakthrough technology or a core invention.
Some large corporations (such as Xerox) rely on their own technical
disclosure bulletins, which are widely disseminated to disclose inventions
that are not patented.

Technical disclosure is one of the forms of defensive publication mentioned

above. There are many reasons why a company may wish to avoid patenting a
given invention, ranging from the understanding that the invention may not meet
the patentability criteria to a willingness to avoid the costs of patenting. A technical
disclosure by an entity is in sharp contrast to keeping information as a trade
secret.

Defensive publishing implies disclosing an invention to the public in order to

ensure that nobody else is able to patent it. This will ensure that nobody has the
right to exclude others over the use of the invention, providing some degree of
freedom to operate to all. An important point when publishing defensively is
that the disclosure is done in a well-recognised technical journal or other
publication that is likely to be consulted by patent examiners who will be checking
the literature while examining future patent applications. There are journals
devoted to defensive publishing some of which have become respected sources
of technical information that are included as part of the PCT minimum
documentation for International Search Authorities. Defensive publication is
generally never done for a major breakthrough in technology or a core
technological invention that is or will be the core strength of an enterprise.

32
Some large corporations rely on their own technical disclosure bulletins (eg. Mechanisms for Leveraging
IP as a Business Tool
Xerox) which are widely disseminated in order to disclose inventions that are
not patented. In the US, the USPTO enables applicants to request the publication
of a Statutory Invention Registration (SIR) of a filed patent which is effectively
a technical disclosure of an invention for which a patent was applied. In registering
an SIR, the applicant abandons the prosecution of the patent, in exchange for the
disclosure of the invention by the Patent Office.

Whatever manner is chosen to limit the chances of facing potentially risky and
expensive patent litigation, all technology companies are well-advised to look
into the matter early on in the research and commercialization process. In some
cases, minor product adaptations, or payment of a small licensing fee to the
patent owner may be sufficient to avoid future disputes. Systematically evaluating
your freedom to operate prior to launching a new product is, therefore, a way of
minimizing (but not eliminating) the risk of your product infringing the patents
owned by others. It will also improve your chances of finding business partners
and attracting investors to support your business development plans.
· Proactive measures including patent landscaping: A patent landscape is
an overview of patenting activity in a field of technology. It is a
comprehensive analysis of patents helping scientists, businessmen and
attorneys to make important decisions in the investments, planning,
development and launch of new products. Patent landscapes actually focus
on what has been patented, where and by whom. It helps in the identification
of patents which can prove valuable while exploring a new market, market
opportunities for licensing, field-wide trends in any field of technology,
competitors and their activity, geographic information as to the place of
research activity. Patent landscapes can be valuable as they can save precious
time and money in the litigation.

Patent landscapes often reveal valuable information relating to intelligence,

internal R&D, competitors, competitive innovation, and can even revive the
corporate IP strategy. It is actually suitable for planning research in any field of
technology. Patent landscapes can be very useful in the fields of agricultural
biotechnology, drug delivery technology, vaccine technology, public-funded
medical research, research on neglected diseases, key technologies in medicine,
to name a few.

Briefly, patent landscaping seeks to conduct a comprehensive analysis of patents

which enables strategists, scientists and attorneys to take key decisions in new
product development, R&D planning and strategic development. The landscaping
is usually carried out for a field of technology. The landscaping study reveals the
area that are saturated with third party patents along with areas, if any, that are
free of patents and, therefore, ripe for research in that area.

Patent landscaping has emerged as an efficient way to achieve research goals.

Besides, it provides a powerful tool for strategic planning and of course to avoid
expensive and embarrassing problems before they begin.

Uses of patent landscaping - Apart from being a useful and strategic tool, patent
landscaping exercises has many other uses. They can be enumerated as follows:

33
Introduction to i) Patent landscaping as a tool provides information for:
Commercialization
• gainful competitive insight into patent free areas of technology,
• identification of gaps and clusters in technology,
• countering of “perception” with facts.
• assessing self portfolios vis-à-vis competition,
• development future research and development strategies,
• increase in the efficiency of innovation,
• transformation of data to knowledge into information,
• identification of new application areas of existing patents.
ii) Besides, patent landscaping also provides information on:
• market opportunities for licensing,
• competitive technology trends,
• gaps in corporate patent portfolios,
• opportunities for entry into new markets,
• targets/risks for patent infringement litigation,
• opportunities for redirecting R&D efforts.
The information mined from this patent landscaping exercise can be used to:
• develop a licensing strategy,
• develop new products and improve existing products,
• determine commercial value of patents,
• identify fundamental invention vis-à-vis improvements,
• monitor patent activity in particular geographic markets.
Example - A patent landscape on rice genome stated that 70% patents identified
were on tissue specific promoters; about 20% of patents were related to
constitutive promoters that induce the expression of the concerned gene in the
whole plant. Promoters induced by abiotic stresses (physical, chemical) and biotic
stresses (pathogens).

An example of data that can be gathered through a patent landscaping exercise

and the information that can be sought from them:

Facts: How much of the rice genome has been patented?

Facts: By whom?

Strategy: What is the practical impact of this for farmers, breeders and
agricultural researchers?

Facts: How much of public-funded medical research is being patented?

Facts: By whom?

Facts: Which public institutions are most active in patenting key life
sciences technologies like stem cells?
34
Facts: In what countries are patents in force and where are they not in Mechanisms for Leveraging
IP as a Business Tool
force for essential medicines?

Facts: When will these patents lapse or expire?

Strategy: What does this pattern of patent holdings imply for procurement o f
medicines?

Facts: Who are the new players in vaccine technology?

Strategy: How can developing countries plan to secure access to the

current and future technologies for vaccine production?

Strategy: What are the trends in research on neglected diseases?

Strategy: What do patenting trends reveal about the changing role of

developing countries in medical research?

Strategy: What is the geographical coverage of patents on key technologies in

medicine, such as HIV/AIDS anti-retroviral drugs; for plant biotechnology, such
as agrobacterium-mediated transfer; for the environment, such as the use of algae
to absorb CO2 — and where is technology already in the public domain? What
technological and commercial opportunities do these offer developing countries?
What are the implications of multilateral agreements in the fields of health, plant
genetic resources and the environment?

4.4 SUMMARY
• We have discussed and understood the feature of the intellectual property
rights, the owner has the rights under the provision of law on such IP rights.
• We have further studied on the routes to get the intellectual property rights
protection by way of Contractual Obligations such as license, cross-license,
assignment etc, and also by other ways like the Negotiations, Defensive
publications, Technical disclosures, Proactive measures including patent
landscaping.
• All of these ways will help the owner because the holder may not need to go
to deal with the Court’s procedure which will take a long time to solve in
case there are some problematic issue such as infringement. For example,
negotiations may be a useful tool to communicate intellectual property rights
in the favour as well as to obtain a mandatory license from the “infringer”.

4.5 SELF ASSESSMENT EXERCISES

1) Prepare a TO DO list for the commercialization of :
a) A personal care product
b) A mobile phone using new technology
c) A new designer label
Please state the presumptions / assumptions at the start of the exercise
2) What is the difference between an IP and IA
35
Introduction to 3) Why would you use a patent landscape?
Commercialization
4) Describe ways to protect trade secret in product?
5) Briefly describe the 4 traditional IP rights
6) Enumerate the international treaties of which India is a signatory

4.6 REFERENCE AND SUGGESTED READINGS

1) Licensing Guide for Developing Countries by World Intellectual Property
Organisation
2) Drafting Patent Licence Agreements by Brian G. Brunsvold & Dennis P.
O’Reilley
3) Licence Agreements: Forms And Checklists by Gregory J. Battersby &
Charles W. Grimes
4) Licensing Intellectual Property in the Information Age by Kenneth L. Port,
Jay Dratler, Jr., Faye M. Hammersley, terence P. McElwee, Charles R.
McManis and Barbara A. Wrigley

1
Reported in “What is Working in IVD: Successful Commercialization of New
Products and Technologies” written by diagnostic expert, Shara Rosen, R.T.
M.B.A., author of six best-selling editions of the industry’s leading market
research report in IVD diagnostics “The Worldwide Market for In Vitro Diagnostic
Tests”. Rosen offers tips gleaned from years of watching the market - keys to
successful new product launches in the industry as it is now.
2
Director of Commercialization in the Waterloo Region, Centre of Excellence
for Commercialization of Research.

36