New Zealand: You are never too small and it's never too early to protect IP!

Last Updated: 10 December 2011

It frustrates me when I hear business owners say "we are too small to worry about IP".

When you are small you are at your most vulnerable.  When your brand is very new, you may not have established sufficient reputation to defend it by suing others for passing off or breach of the Fair Trading Act. This will require you to prove your goodwill in the geographic area in which the infringer has started operating. 

Trade mark registration instantly gives rights throughout NZ

If you take the simple and inexpensive option of registering your brand as a trade mark, you do not have to prove goodwill.  You can prevent anyone anywhere in New Zealand from using the same or a similar trade mark in relation to the same or similar goods or services. 

Imagine starting a new lawn mowing business in Auckland that you hope to franchise, but finding when you go to set up your first franchise territory two years later in Wellington that someone had started a competing business there under a very similar name about six months after you started in Auckland.  Unless you can prove you had a significant reputation amongst a section of the public in Wellington more than 18 months ago, your franchise plans will be ruined.

Cheaper to enforce formal IP protection

It also annoys me when people say "it's not worth protecting IP if you cannot afford to enforce it".  Ninety percent of IP1 disputes never get anywhere near a court, and are resolved relatively quickly and without great expense.  Usually a cease and desist letter pointing out the infringer's faux pas will catch the infringer like a possum caught in headlights.  Without the formal IP protection, the dispute would be far more difficult and costly to resolve.

Do not disclose your product until you have patent or design protection

Unfortunately, many New Zealand entrepreneurs also make the mistake of waiting until their innovation has proved itself commercially before they seek patent2 or design protection.  A fundamental requirement in most countries for obtaining a valid patent or design is that the innovation is novel3, which means not known, used or published4 prior to the date you file the patent or design application5.  So business owners that offer their amazing new product for sale before they seek protection for it will shoot themselves in the foot. 

There are some limited grace periods of up to a year in countries like the United States, Canada and Australia, however in many important markets (including Europe), you will have very little chance of securing protection.

So, make sure you see your patent attorney before you put your product on a website or offer it for sale or even talk to potential customers.

Cannot afford IP protection?  Can you afford not to have it?

IP isn't as expensive as many people believe.  It is also possible to delay some of the more expensive international filing costs for many months.  In the case of patents you can delay up to 30 months or more using the Patent Co-operation Treaty system.

Process for patenting a new invention using PCT application

Let's use protecting a new invention6 as an example.  I would first file a provisional patent application in New Zealand.  This will cost me around $5,000, maybe less.  That provisional application buys me 12 months before I have to consider completing the New Zealand application, and file corresponding applications into international countries. 

Immediately prior to the 12 month deadline, I would complete the New Zealand application and file a Patent Co-operation Treaty application (PCT7 application), which effectively covers in a single patent application about 180 countries for around $12,000 - $15,000. 

The PCT application8 buys me another 18 months, before I have to file individual complete applications in each international country of interest, and I can at that time elect to file into only one or all 180+ countries. 

Benefits of pending patent application

As soon as I have filed my New Zealand patent application, I have the deterrent and marketing effect of being able to say "patent pending", no one can see my patent application until it is actually published, and I now have an asset that I can talk to potential licensees about.  So for under $20,000 I have created a new asset that may well form the foundation for an ongoing revenue stream to my business.  If you can't raise $20,000, then being in business is not going to be a long term career for you.

Of course, unless I actually go ahead and complete the PCT application in a particular country, there will be no rights in that country.  Completing the application in each country is where costs can increase quickly.  However, before the 30 month mark you should have a very good indication of whether this new product will be successful, and you should able to raise the capital required to complete your patent application in the appropriate countries.

Deterrent value

Without the patent application, and the granted patents that will ultimately result from it, my new invention would likely be copied extremely quickly and I wouldn't have any chance of stopping it.  Even if the pending9 patents deter or delay one competitor, then I would say they have paid for themselves.  If someone does infringe the patent, then you at least know you have someone very interested in using the invention - and a probable candidate to become a licensee of your technology. 

Licensing in return for royalties

IP doesn't always have to be about stopping someone from using your technology - in fact, it can often make far more sense to let others use your IP in return for a royalty under a licensing agreement.

Licensing lets you exploit your technology in geographic areas where you do not have expertise or sufficient resources to create a distribution channel.


1Refers to the ownership of an intangible thing - the innovative idea behind a new technology, product, process, design or plant variety, and other intangibles such as trade secrets, goodwill and reputation, and trade marks. Although intangible, the law recognises intellectual property as a form of property which can be sold, licensed, damaged or trespassed upon. Intellectual property encompasses patents, designs, trade marks and copyright.

2A proprietary right in an invention which provides the owner with an exclusive right for up to 20 years to make, sell, use or import the invention. In exchange for this monopoly the patent is published so that others can see how the invention works and build on that knowledge. The patented invention may also be used by the public once the patent lapses.

3One of the requirements for patentability and the first part of the test for inventive step. In patent law "novel" simply means new or not previously known. New Zealand currently has a "local novelty" requirement forpatentability. This means that the subject invention will not be novel (and therefore will not be patentable) if it was known or used in New Zealand before the date on which the application for apatent was filed. There is a proposal to amend our legislation in late 2010 to move to an "absolute novelty" standard. This means that the subject matter must not be known or used anywhere in the world before the date of application in New Zealand. If the subject matter is known or used before the date of application, this is known as "anticipation"

4At some point a patent application is published, meaning its contents are available for anyone to read. In New Zealand publication occurs when a patent application is accepted. However, in most countries publication occurs 18 months after the application is filed.

5In most jurisdictions patent applications are subjected to an examination process to determine whether the subject matter is novel and inventive. The terms "application", "pending" or "patent application" are used to describe the status of the application up to grant.

6The product of the creative process of inventing. In intellectual property law "invention" is a legal term usually describing patentable subject matter. Under current New Zealand legislation that subject matter includes any manner of manufacture which is new and involves an inventive step. However, certain types of invention are excluded frompatentability. They include inventions which are contrary to morality (for example weapons of mass destruction) and methods of medical treatment (on public policy grounds that such methods should be available for health practitioners to use to the benefit of all society).

7The Patent Co-operation Treaty is an international law treaty establishing a single procedure for filing a patent application in many countries. During the international phase of the application it is assessed for patentability by an international examiner and the application can be amended as a result. After the international phase is the national phase, in which applications are filed and examined in individual countries in which protection is required. Filing a PCT application delays the filing of multiple individual applications in many countries by up to 18 months. Not every country is a member of the PCT so you should always check with your IP advisor.

8The Patent Co-operation Treaty is an international law treaty establishing a single procedure for filing a patent application in many countries. During the international phase of the application it is assessed for patentability by an international examiner and the application can be amended as a result. After the international phase is the national phase, in which applications are filed and examined in individual countries in which protection is required. Filing a PCT application delays the filing of multiple individual applications in many countries by up to 18 months. Not every country is a member of the PCT so you should always check with your IP advisor.

9In most jurisdictions patent applications are subjected to an examination process to determine whether the subject matter is novel and inventive. The terms "application", "pending" or "patent application" are used to describe the status of the application up to grant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

James and Wells is the 2010 New Zealand Law Awards winner of the Intellectual Property Law Award for excellence in client service.

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