Australia: The role of IP in innovation

Last Updated: 11 June 2018
Article by Michael Zammit

Innovation is generally understood as the process of bringing valuable new products (and services) to market, and has been highlighted as one of the key factors that determines the future success of an organisation. Intellectual property (IP), and the management of the IP throughout the new product development process is a critical factor in successfully commercialising products and services, for example by providing a monopoly to the IP owner, and barriers to entry for competition. The purpose of this article is to briefly outline what forms of IP protection may be required at each stage of the product development process, and how overall management of the IP may lead to overall improved revenues and profitability.

What is Innovation?

Innovation is generally understood as the process of commercialising new ideas. Through innovation, a business will endeavor to deliver new value to its customers to generate improved revenues/profitability by:

  1. offering new commercially viable products/services, which generally result from "radical innovations", and/or
  2. offering more efficient ways of doing things, which generally result from "improvement innovations".

In the latter case, an improvement innovation tends to produce an improved product over its ancestor eg. improvements in, say, raw material use, or the application of new/better production processes that allow old/new products to be made faster, better, or more cheaply.

The cycle of innovation can be broken down into several stages. For the purposes of this article, it is convenient to consider 4 stages of innovation, comprising:

  • conception of innovative ideas,
  • the research and development (R&D) stage,
  • commercialisation of product or services, and
  • the marketing of those products or services.

As the activities undertaken at each stage are different, it follows that the IP considerations are different at each stage, too. The process may also include iterative aspects, and if often cyclical in order to continually produce new product and service offerings to the market.

As commercialisation of products and services is complex and requires input from a multitude of disciplines (e.g., technical experts in R&D, marketing, external consultants, suppliers, outsourced component manufacturers/service providers, etc), it is important to consider the use of different IP tools throughout the process, as highlighted below.

What IP considerations are relevant during conception of innovative ideas?

Prior art searching and analysis is a critically important part of this stage, especially searching and analysis of the patent literature, which contains a vast amount of information not available elsewhere. By reviewing the prior literature, it is possible to ascertain whether an idea is new and potentially inventive, whether there may be a commercial market for the idea and, therefore, whether or not to proceed with investment into the idea. A wealth of other useful information is also available, including information on potential competitors and technology trends. We have recently authored an article on prior art searching and analysis, which can be found here.

During this initial stage, it is imperative that innovative ideas are kept as trade secrets. Apart from not wanting to alert competitors, this is because not all commercially viable ideas can be, or will be, patented. To qualify as a trade secret the information must meet several key requirements, including that the information must be documented, access to it controlled and limited, and the information must be of value and of course kept secret. Examples of trade secrets include information such as: business plans, manufacturing processes, algorithms, software code, marketing information, and client data. Clearly, confidentiality agreements with those conceiving the innovative ideas (e.g., employees), or those who are being exposed to them (e.g., suppliers, collaborators, subcontractors, etc) are essential at the outset of this first stage of innovation.

There are disadvantages to trade secrets, however, including that there is no protection against independent creation and/or disclosure of a similar or identical innovation by a third party. Public disclosure can lead to the loss of your right to obtain a patent and, in a worst case scenario, the third party may patent the idea before you.. Keeping trade secrets is an increasingly difficult task in today's environment where employees change companies regularly. The decision on whether to protect an invention with a patent application or to retain it as a trade secret is an important one, and the choice can depend on a number of factors, which are best assessed by an IP professional.

What IP considerations are relevant during the R&D stage?

For the same reasons as mentioned above, keeping trade secrets continues to be relevant during this next stage of innovation, as is the continuing need to search and review prior literature. Relevant inventions should be protected by lodging patent applications during this stage, and multiple "layers" of patent protection should be considered too. A patent protects an "invention", which is defined as the generation of a new idea or knowledge which aims to solve a specific technical problem, and most commonly relates to an article of manufacture (e.g., light bulb), a composition of matter (e.g., compounds), a system (e.g., mobile phone), or a process (e.g., process of making or using).

Once a patent is filed, however, the "clock starts ticking", meaning that a sequence of strict deadlines must be met in order to keep the patent application "alive". Accordingly, there is some strategy around when to file the patent application(s) – if too early, there may not be time to generate the required enabling experimental data to support broad patent claims, and if too late, the risk is that a competitor will beat you to filing an application directed to the invention or the invention is superseded.

The R&D stage is also where investigations can be undertaken on the risk of infringement of third party rights, i.e. freedom to operate searching and analysis (see our article here). Further strategic decisions can be taken at this time on whether it is possible to avoid third party patents which are at risk of infringement, or whether those rights could/should be licensed or bought, or attacked and potentially removed from the patent register. Accordingly, this is the ideal time to make adjustments if necessary to avoid IP legal hurdles which might arise.

Depending on the innovation, another IP tool to consider is a design registration, which protects the appearance of a product such as its shape or pattern.

What IP considerations are relevant during the process of commercialising products or services?

The existence of IP surrounding the innovation, and clarity around the ownership of the IP can be critical to obtaining funding from third parties during the commercialisation process. Obtaining a valuation of the IP can be important in this respect, too. At this stage, there may be opportunities to seek and obtain commercialisation and export grants.

Furthermore, ownership of IP assets can assist in ensuring that the innovation is not "lost" during partnership with third parties who may be required to provide further technical development to make the innovation commercially viable. It may also become apparent during this stage of innovation that additional IP is required, in which case that IP should be identified and licensed, or potentially bought.

Further patent applications may be appropriate at this stage, especially to protect improvement innovations as discussed above.

What IP considerations are relevant during the process of marketing products or services?

Finally, during the marketing stage, other IP tools become relevant, especially trade marks and designs as they enable consumers to identify a product/service of a particular company and enable them to distinguish the product from other similar products/services.

IP rights require constant monitoring, which is the responsibility of the owner. It is best practice to monitor the market to identify any third party copying or imitation of the product, for example at trade fairs, or using the customs authorities to stop infringing goods from entering the market. Enforcement of IP rights may be important in protecting market share and revenues.

Finally, relevant material can be protected by copyright, such as software, product literature and images, website, drawings, plans, and manuals.

Summary

Innovative technologies stand a better chance of successfully reaching the marketplace if the 3 main tools of IP protection – patents, designs, and trade marks – are used strategically. As there will be some overlap of activities at each stage of the innovation cycle, the IP considerations will "evolve" over the process. Initially, and throughout the innovation process, it is imperative to retain trade secrets, and once into the R&D stage patents and design applications can be used to protect functional and aesthetic features, respectively. Consumer recognition of the product and brand can be protected via trade marks, which is important during the life of the patent, and especially after the patent has expired in order to retain market share as competitors enter the market. A strategic, planned, and holistic approach to the use of a combination of IP tools in the innovation process can allow an organisation to obtain a higher return on investment through maintaining a premium market position.

Closing comments

The involvement of an IP professional is critical at each stage of the innovation process, for example to provide advice on:

  • legal (confidentiality) agreements,
  • prior art searching and analysis (patentability, freedom to operate, competitor and landscape mapping),
  • trade mark and design registrations,
  • patent strategy, and for when a trade secrets vs patent protection is appropriate, and
  • enforcement matters.

Through collaboration with our colleagues in our affiliated intellectual asset advisory firm, Glasshouse Advisory, who come from legal, accounting and finance backgrounds, Shelston IP can offer additional assistance relating to:

  • IP strategy (e.g., IP analytics, monetisation),
  • IP economics (IP valuation, royalties and licensing, transfer pricing, etc), and
  • Funding opportunities (R&D tax, Export Market Development Grants, government grants, collaborative funding).

Outlined in this article is a description of the main stages of the innovation process and what main IP tools are relevant throughout. When an idea is an important commercial asset, it is wise to engage a qualified IP professional (patent or trade mark attorney) to assist in the generation of relevant intellectual rights that suitably protect that commercial asset. It is preferable to choose an IP professional who has genuine technical expertise in the relevant technology, and an excellent understanding of the practicalities of bringing products and services to market through real-world experience with the product development process. At Shelston IP, we have a number of highly experienced attorneys who can assist in navigating these complexities. Contact us to understand what IP tools are most appropriate for your innovation.

The content of this article is general in nature and must not be relied on in lieu of advice from a qualified professional in respect of your particular circumstances.

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.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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Michael Zammit
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