UK: The Birth of Brand Value – IP for Software Businesses

Last Updated: 2 October 2012
Article by Jackie Maguire

As Jessica Ennis crossed the finishing line of the 100m hurdles on 3rd August 2012, did she understand that she was also building value in her IP? Jim Asher of Coller IP was there to witness the event and we reflect on the many parallels between the birth of sporting personality brands and the birth of brand value in any other business.

IP rights such as copyright, trade marks, and trade secrets are intangible assets that sport champions create – and in some cases use – to win their position in the medal tables.  Certain IP rights can become a significant revenue source not only for the athletes but also for the sponsors, clubs, organisers of sporting events and anyone else who benefits from licensing revenue.  When you stop to think about it, a champion is creating a business – and the protection of IP rights is as important to that business as it is to any other.

With the growing costs of competing at international levels, businesses need to understand the value of intangible assets that they are building, so they can properly build and manage a full portfolio of IP to protect those aspects that make them stand out from the rest of the field.  Like sporting champions, businesses have IP hurdles to clear.

Technological developments used in the games, including those in the Paralympics, can be protected by patents – but they have to be novel and inventive.  This is also true for technical developments in other sectors including the software sector.  Keeping up with the pace of developments then becomes an important aspect of any IP strategy.

IP in the software industry

It is claimed that 50% of all software used today is less than three years old – which is staggering. With such rapid developments in the technology, there has been significant debate as to whether businesses can rely on the approach of using patent rights that classically protect and recover investment over longer periods of time.  Such a business model may or may not apply to all software development companies.   Nevertheless, the $1.05 billion damages awarded to Apple in a 2012 patent lawsuit against Samsung cannot understate the role that patents have played in protecting developments in mobile phone software and operations.  Patents protecting software can be valuable!

Patent protection

It is possible to patent certain functionalities of software, typically where they are grounded by hardware or some other technical effect.  The rules for patentability vary between the major jurisdictions, but the principle remains the same: patents will apply to a function of the software, regardless of the code that expresses that function. 

Simply put, a patent is a "tool" defining an invention that gives its owner (e.g. inventor or assignee) exclusive rights for a limited period of time (usually 20 years) granted by a national government in exchange for making the nature of the invention available to the public. In most countries the patent gives its owner the right to stop others from making, using, selling, or importing the patented invention without permission.   In the software industry, the business model is typically for the owner to provide a licence to use the patent as part of an overarching licensing strategy.

To build a patent portfolio that is worth licensing, there need to be patents and/or good pending patent applications in it. What is a "good" patent or patent application? As a patent defines an invention, it is the scope of this definition of the invention that can prevent others from making variants of the invention. At the very least, a "good" patent should: 1) have a broad definition of the invention; 2) cover obvious work-a-rounds or variants; 3) still be commercially applicable to the business; 4) cover the aspects of the core product that implement the invention.

The patent application is then examined by the patent office to determine whether it satisfies the requirements for patentability, the main requirements being that the invention must be new and inventive.

During the examination, there are several rounds of review/discussion with the patent office. This can result in amending and narrowing the scope of the claimed invention to ensure it is new and inventive over the prior art. Care must be taken during examination when amending the application because of the delicate balancing act between having a patented invention and having a commercially valuable patented invention. It is essential that the owner and patent attorney communicate with each other to understand this balance in terms of business goals, the prior art, and the requirements of patentability.

Only once the patent office is satisfied that all requirements have been met, will they grant a patent.

Copyright

Whilst some aspects of software are patentable, and do get patented, a lot of innovation in software does not benefit from a strongly protected patent position. Software however is one of the few technologies where both patents and copyrights apply.  Copyright applies to the code in which software is written. But copyright only protects against copying the particular code of a piece of software.  As stated above the functionality expressed through that code may only be protected by a valid patent.

Copyright gives the creator an exclusive right to stop others copying and otherwise exploiting their "works". It can cover a wide range of works, including in addition to computer software,  for example, dramatic and musical works, web pages, photographs and diagrams, films and videos, typographical layout of publications, architectural works, drawings, text, and manuals, as well as the artistic aspects of product packaging. In contrast to a patent, it protects the form or expression of a work rather than the idea underlying it.

If others infringe your copyright, you can take legal action against them as long as you can prove that you were the originator of the works and that the copying is significant, although there are some exceptions relating to issues such as whether the alleged infringement was for educational purposes. In the case of online infringement, Google, for example, has taken a number of steps to help protect copyright. The good thing about copyright is that it is automatic and does not require registration. Under UK law, a business would by default own the copyright of work created by its employees. However, under UK law independent contractors not on your payroll by default own copyright in any work they create on your behalf. You can, however, agree otherwise under contract and have copyright in their work assigned to you.

Value in Trade Marks

So where might the lion's share of value be developing in a software product or business?  In many cases, the value develops from the launch day of the product, or the birth of the product brand.  Such brands can be protected by registrations as Trade Marks and these can become most valuable assets.

Trade Marks themselves can be licensed as part of the overarching business strategy alongside other IP rights.  A requirement to use a brand name alongside technical solutions that are licensed can continue to build value in that brand.  Ownership and controlling rights of the images and the words surrounding that brand then becomes paramount.

Trade marks are more than the company name – they can include words, logos, sounds, colours, gestures, brand names and slogans – that is, distinctive features which can be represented graphically and can distinguish the goods or services of one business from those of another.  They can even consist of the shape of goods or their packaging.

Registration of such marks can be indefinite as long as the renewal fees are paid. Without registration, trade marks can still be protected in certain circumstances through an action for 'passing-off'. Although common law may apply if enough reputation and goodwill have already been established, it is still a good idea to register a trade mark as this will make it much easier to stop someone else from using it. In order to register a trade mark in the UK it must be possible to define it on paper and you must intend to use the mark.  In addition, it must be distinctive for the goods and services you use it for. A qualified trade mark attorney will be able to assist you with this process and ensure that you have the appropriate and adequate form of cover to support a licensing strategy.

So when your software product was launched, did you consider your IP strategy – and is the value in your business secured?  Has your company cleared all of the hurdles necessary to win the race and remain at the front of its field?

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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