South Africa: How Small Businesses Can Protect Themselves Against Retail Giants

Last Updated: 1 March 2019
Article by Ruan Dickinson

"New year, new me" ...well, the second month of 2019 is here which means that our New year's resolutions are next year's problem and we are pretty much back to basics. However, if you took the leap and started your own company in 2019 (or are in the process of doing so), there is one New Year's/ February/ "as quickly as possible" resolution that deserves your undivided attention - to ensure that your intellectual property (IP) portfolio is in order.

New business owners fail to prioritize their IP affairs for a number of reasons. Entrepreneurs would rather invest in online marketing campaigns, hiring employees or research and development programs as it is easy to measure a company's growth against these assets. There are also a number of entrepreneurs who are not familiar with IP and the value it has to offer or they expect it will be too expensive for their start-up budget. On the other side of the spectrum you find the naïve entrepreneur with a "no one will ever steal my idea" or "a trade mark application is just a piece of paper" mentality.

This is not to say that marketing and hiring the right employees is not a vital step in establishing a successful business, but protecting your IP is equally important. If you find yourself in one of the above situations, make sure to contact an attorney specializing in IP law in order to explain to you the value of having sufficient IP protection and the risks you face of prioritizing becoming a vegan or losing weight in 2019 above having your IP affairs in order.

There are various forms of IP protection and subject to the nature of your new product and/or service one or more of these forms of IP may apply. However, regardless of the nature of your new business, the moment your idea is conceptualized (in whichever form) you need to immediately contact an IP attorney to ensure that all aspects of your business that are eligible for IP protection are dealt with accordingly. That is, before seeking investment, pitching your business or introducing your product/service to the market (even if it is simply for conducting market research), your IP protection, whether a patent, design, domain or trade mark, needs to be secured prior to disclosing your product/service in any way.

For example, you start selling t-shirts made from environmentally friendly materials under the brand name TREE SHIRTS but you fail to secure a trade mark application in class 25 (which covers "clothing articles"). A retail giant notices your brand from a local flea market and realises that the brand name will appeal to its customers. The very next day they register as a domain name, and file a trade mark application for TREE SHIRTS and several TREE SHIRT logos in class 25 for their new clothing line. They spend millions in advertising and after 18 months it becomes one of its most successful brands ever. After visiting the retail giant, you realise that they have "stolen" your brand and are making a massive profit. You rush home, open your computer and send them the following email: "Dear Retailer. The TREE SHIRT brand was my idea and I am going to sue you for millions. Kind regards. Joe Soap". You consult with an IP attorney only to be advised that you have no real prospects in being successful in formal proceedings against them as you have no registered rights and very limited common law rights. You accept defeat and realise that you could have prevented all of this by simply filing a trade mark application.

For those of you who have ever seen Shark Tank or Dragon's Den where entrepreneurs pitch their business ideas to investors, you will note that the investors always ask whether the entrepreneur has secured their IP rights (whether it is trade marks, patents or designs). Without having the necessary IP protection, there are too many risk factors involved and investors will, in all likelihood, withdraw from the opportunity. However, with proper IP protection in place, it offers you and your potential investors, security and more opportunities in that you will be able to protect your product against infringement and defend your sole right to use, make, sell or import it. You will also be able to negotiate royalty deals (which are very attractive to investors), exploit it through strategic alliances and obviously, when the time is right, make money by selling it.

In short, if protecting your IP for your new business is not a part of your New Year's resolutions, I suggest you consider moving losing weight, becoming a vegan or doing your Masters in Philosophy to next year's list and instead, contact your IP attorney as soon as you are done reading this.

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.

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