New Zealand: Recipe for Success - Are you protecting your competitive edge through IP protection?

Are you protecting your competitive edge through IP protection?

In the food and beverage industry, you should be able to immediately rattle off your point of difference over your competitors.

This point of difference is particularly important in the export market due to the geographical constraints of New Zealand, in terms of the distance to our target markets as well as our restrictions on land area.

Your company's point of difference may be reducing your costs due to improved processing/manufacturing efficiencies you have developed. This may allow you to compete on price, yet maintain a higher profit margin.

Alternatively, you may have developed a novel¹ added value food product which none of your competitors have, allowing you to charge a premium.

However, as many of you will appreciate, it is only a matter of time before your competitors, either based in New Zealand or overseas, catch on to your point of difference. Suddenly, you are on equal playing fields, or quite possibly at a disadvantage due to the challenges discussed above.

As such, many of you are doing your company a disservice by not protecting your competitive edge through IP² protection, such as patents.

Of course, in many cases patents may not be a suitable strategy, and other forms of IP protection are better suited, such as trade secrets. The take home message is to at least have a discussion with a patent³ attorney before any disclosure⁴ or sale. This can help you identify what form of IP strategy is best suited to your company's goals.

As outlined below, patents can allow your company to really leverage your point of difference for much longer periods of time than achieved just through speed to market and/or maintaining trade secrets. For example, such secrets are often lost, for instance when your employees go to work for a competitor; a common problem seen in New Zealand.

I also outline how patent rights can lead to a host of other growth opportunities, besides simply protecting your patch.

Path to market

One of the great advantages of the food industry is, when compared to the likes of the human pharma, the path to market is relatively short and without needing to go through clinical trials.

This actually makes patents in the food industry particularly valuable because the 20 year monopoly⁵ can be put to its maximum use during the commercialisation⁶ of your product or process. This links in well with our country's expertise in getting a new food product to market quickly.

A relatively fast R&D process can also help to avoid ongoing patent costs for a "dead duck" concept.

This also means there is provide a window of opportunity to withdraw your patent application⁷ prior to publication⁸ (normally 18 months after an initial filing). This can be a fall back position to allow for trade secrets or to avoid your competitors from learning from your R&D mishaps.

Multi-industry applications

In many cases, R&D in the food sector will have multiple applications. For example, development of a new food processing technique could lead to improved efficiencies for both the seafood and beef industry.

Therefore, you can retain rights to your patented technique in your industry of interest, while cross-licensing in a different industry or even your same industry in another country. This adds passive income, generates ongoing collaborations, and can synergistically add to our export market.

We only have a small pasture

The geographical size of New Zealand means we cannot mass produce compared to the likes of South America, USA or China.

Indeed, John Key has signalled a key area for growth in our export industry is through food exports which should treble to $58 billion p.a. by 2025⁹. If we have any hope of meeting this target (and similar growth of your company), it will need to be from added value products or improved processing techniques to boost productivity or lower costs.

Low threshold for patent exemplification

Compared to other areas in biotech, the food industry is a relatively predictive art.

What this means is if you are able to show the effectiveness of a new antimicrobial agent for preserving poultry, it is also likely that you could seek valid patent protection for preserving other meats, other food products, and potentially even other uses with very little supportive data.

As discussed above, this opens up a world of licensing opportunities.

Advertising

Overseas companies are becoming increasingly IP savvy and regularly review patent filings and publications. They may then approach your company if your technology looks promising or synergistic with theirs - this can lead to new business opportunities and income streams through licensing to avoid patent infringement¹⁰ issues.

You can also use patents to advertise your company's innovative nature to the general public. Patented technology instantly helps to give your product and company an element of sophistication.

Footnotes

¹ One 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 for patentability. 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 a patent 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".
² Refers 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.
³ A 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.
⁴ Refers to the description of the invention provided in the specification accompanying a patent application. For a patent to be valid, the invention must be described in enough detail to enable a person who is skilled in the field of the invention to put it into practice.
⁵ A patent grants the patentee a monopoly in the invention that is the subject of the patent. The monopoly extends to the exclusive rights to make, sell, use or import the invention.
⁶ Refers to the process of introducing a new product or service to the marketplace (whether in New Zealand or overseas). For the purposes of a patent application commercial working can include taking orders for a product or service (even if in confidence). It is important to understand that commercial working of an invention before a patent application is filed may invalidate that patent application (see validity below).
⁷ In 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.
⁸ At 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.
⁹ http://www.stuff.co.nz/sunday-star-times/business/5910489/Whats-the-plan-National
¹⁰ Refers to the commission of a prohibited act with respect to a patented invention without permission from the patentee. In New Zealand, the Deed of Letters Patent confers on the patentee a monopoly to make, use, vend or exercise the invention in New Zealand. Performing any of these acts without the permission of the patentee will amount to an infringement if the patent is current and in force. Permission will typically be granted in the form of a license. Remedies for infringement can include an injunction to restrain further infringement, payment of damages suffered by the patentee as a consequence of the infringement or payment by the infringer of any profit he/she/it made by virtue of the infringement, and legal costs.

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.