The most common mistakes made in connection with IP management at the company

The most common mistakes made in connection with IP management at the company

28 February 2023 - Aleksandra Tabaka

Intellectual property is gaining importance in post-pandemic times of economic crisis. Entrepreneurs’ awareness is increasing and they are beginning to understand the IP value as a component of the company’s assets which gives the company a competitive edge on the market. However, it still happens that the need to protect intangible assets is disregarded by inventors or entrepreneurs who are unaware of the consequences of the failure to complete legal formalities in this respect. Every form of human creation of a unique character should be legally protected. Below we list the most common mistakes made in IP management:

  1. Non-use of trademarks

Regardless of the industry and the object of business activity, each business entity uses and is distinguished by trademarks or designations of products and services on the market. However, filing a trademark application with a patent office is only the beginning of the IP adventure. When the application is published in the Patent Office Bulletin, anyone (as a so-called third party) may object to the registration of a given mark. If such an objection is not filed or a filed objection is dismissed, the mark will be registered. However, such registration alone does not guarantee that the protection right will be retained. The trademark must be used! The right holder has 5 years from the registration date to start using the mark. When this period expires, the right holder is obliged to use the rights granted to them to prevent the trademark from being cancelled. Otherwise, such non-use may be regarded as an undue attempt to block the mark for one’s competitors. A common mistake made by holders of trademark protection rights is also the failure to collect evidence of trademark use. This is a must! This is a safeguard in case another entity decides to “take over” our mark. Proofs of use may include, e.g., photos of packaging, advertisements, labels, invoices, order confirmations, advertising catalogues or price lists. These materials should indicate what mark, during what period, in what territory, to what extent, and for what goods or services was used. Accordingly, it is worth not only registering trademarks, but above all using them within a specific scope (and document it just in case)!

  1. Lack of a strategy for the development of IP rights portfolio

IP rights are territorial in nature. This means that a market monopoly on the use of a given mark applies only in the territory of the country for which an exclusive right has been granted, e.g., a national trademark protection right granted by the Polish Patent Office applies only in Poland. Therefore, when registering the right, you should precisely define the area of protection for a given mark. A careful assessment of the situation is all the more important as some rights will be impossible to acquire at a later date, e.g., for an industrial design following twelve months after its public disclosure or for a patent right.

A common problem is also the failure to provide protection for intangible goods despite their exploitation in new territories. If a trademark or an invention starts being used in another country, it is also necessary to apply for legal protection there. In addition, industrial property rights should be renewed within the time limit set by regulations by paying fees to patent offices. Since a fee for trademark protection rights is to be paid every 10 years, it is easy to forget about this obligation after such a long time. Every year, a number of clients seek our assistance in relation to non-payment of a patent right renewal fee, which needs to be paid annually. Therefore, proper protection of intangible assets by a company should involve compliance with formal requirements for the maintenance of industrial property rights in force in the territory where the company’s economic interests require protection.

  1. No database protection

Databases in Poland are protected under the Act on Copyright and Related Rights (when the database has the features of the work) and the Act of 27 July 2001 on the Protection of Databases. According to the definition set forth in the provisions of law, databases having the features of the work are subject to copyright even if they contain unprotected materials, as long as the selection, layout or compilation therein is of creative nature. However, a database does not need to meet such criteria to be protected. If the structure of the database is not an original piece of work (it has no features of the work), its content can be protected under the sui generis right. And who can be regarded as the database owner? The Databases Act presumes that a database producer is the entity whose name or company name is displayed on copies of the database or made public in connection with its dissemination. If the owner of such a database is an entrepreneur, despite legal protection, he should provide IT security measures to prevent data theft, for example, by hackers or even an employee leaving the company. Contracts signed with employees should include provisions on data confidentiality and non-competition. Also, it is worth holding periodic training as regards business secrets for key employees. This is important to avoid long and costly court proceedings, among others regarding the take-over of ready-made customer databases or technological solutions by employees or business partners.

  1. Disclosure of design or technical solutions prior to filing an application for registration

The appearance of goods, packaging, product display and external aspect of technical solutions may be protected under the industrial design right. Protection is afforded to the form of an article or a part thereof which manifests itself in particular in characteristic lines, contours, shapes, colours, texture or material of the article, and its ornamentation. If these aspects distinguish the goods provided by the entrepreneur from others, then original shapes of cookies, furniture or industrial pumps alike should be protected. In principle, it is easy to obtain protection under this industrial property right, as the Office does not examine whether the design filed for registration meets the prerequisites of novelty and individual character. It is only formal aspects of the application, compliance with the definition of an industrial design and the absence of violation of public order and principles of morality that are assessed. However, in order to avoid cancellation of the industrial design in the future, designs, technical solutions or inventions should not be disclosed before filing an application for registration. On the date of filing, the design should be new and of an individual character. And it is considered new only when it has not been disclosed to the public before the date of filing with the patent office. So it is best to register it before placing it on the market or otherwise disclosing it. Filing is also possible at a later date, in line with the so-called novelty grace period principle, i.e. within twelve months from the date of its public disclosure. However, this entails the risk that the same or a very similar design may be filed by another entity. Therefore, sometimes unintentional disclosure of a solution may result in a refusal to grant the right or even the invalidation of the design on the grounds of its premature public disclosure. In the case of designs which may turn out to be crucial for the development of a company, registration costs are disproportionately lower than future disputes over these intangible assets.

  1. No protection of rights to trademarks and industrial designs in contracts with distributors

Where the competition on the market is fierce, companies look for different ways to make their offer visible. Frequently, the creation of attractive goods and their eye-catching presentation involve considerable financial outlays, which is why all intangible assets belonging to the company should be protected. Both trademarks and industrial designs are protected by industrial property law, but that’s not all! The provisions of the Industrial Property Law Act are without prejudice to the protection of trademarks or industrial designs specified in other acts. These may also be protected under the provisions of the Act of 4 February 1994 on Copyright and Related Rights. The copyright law applies to any manifestation of creative activity of an individual nature, the so-called work. Interestingly, despite full protection for a trademark or industrial design obtained, copyright infringement may occur. A trademark or an industrial design, if it meets the conditions for being considered a work within the meaning of copyright law, is also protected as a piece of work. Its protection as a work does not require any formalities to be fulfilled. Thus, it may happen that the failure to complete copyright-related formalities, e.g., as regards graphics for a design, may result in the invalidation of the trademark or design, litigation or court proceedings due to, for example, allegations of unlawful use of such a trademark, or additional remuneration for the author (in this case, an employee) for the use of their intellectual property. A fairly common mistake made by entrepreneurs is the failure to sort out the issue of effective acquisition of rights to intangible goods. Conflict may also occur when the entrepreneur cooperates with distributors, but does not complete formalities related to the use of his marks or designs. The agreement signed between the company and the distributor should clearly set out the rules related to trademark rights. The agent may (also unintentionally) misappropriate the mark or even try to register it in the patent office. In such situations, expensive litigation often follows. The solution here is to include relevant provisions in the cooperation agreement or to conclude a license agreement for the use of the mark. The costs of such safeguards are relatively small, and they can save us the considerable expenses related a long-lasting dispute over exclusive rights.

  1. Rights to works, design and technical solutions – arrangements made between the employee and the employer

Entrepreneurs conducting business activity related to the creation of various types of works, new technical solutions or industrial designs are at risk of disputes resulting from the failure to complete formalities related to legal issues when the author is the entrepreneur’s employee. The fact that the employee is in an employment relationship with the employer and performs an activity of a creative nature does not mean that the employer automatically acquires rights to such intangible goods. It is difficult to protect all the works created in the company, especially if the amount of creative work is significant, but the most important works certainly should be protected. A good solution is to establish simple procedures for employee innovation in the company, i.e. the possibility to submit one’s own ideas regarding both innovative product solutions, as well as business or operational improvements. Then you can collect data about such solutions to manage them more purposefully. This leads to adequate protection of the most valuable assets in the form of intellectual property objects.

Effective legal protection involves obtaining proprietary copyrights or industrial property rights. However, an exclusive right (e.g., a patent) may only be applied for by the entity in whom the right is vested (e.g., the right to file a patent). To use and benefit from the solution, you must also hold a legal title thereto (e.g., an ownership right, license). The right to obtain a patent for an invention or a protection right for a utility model, as well as rights arising from the registration of an industrial design, is vested in the inventor/author. When an invention, utility model or industrial design is created as a result of the inventor’s or author’s performance of duties arising from their employment relationship or another civil law contract, this right is vested in the employer or the ordering party (the so-called employee invention), unless the parties have agreed otherwise. Similarly, if an employee has created a work as a result of performing their duties arising from the employment relationship (the so-called work for hire), their employer acquires the copyright upon the acceptance of the work within the limits resulting from the object of the employment contract and the mutual intention of the parties, unless the employment contract stipulates otherwise. Therefore, it is necessary to be cautious what is actually agreed and what the object of the arrangements is. A common problem is the discrepancy between the project planned and the outcome of conducted research, in particular the long-term one. In addition, not every creative activity performed by the employee will be the object of rights acquired by virtue of law by the employer or the ordering party. It is necessary to demonstrate a functional relationship, namely to acknowledge that the result of the employee’s creative activity has arisen from the performance of employee duties. The performance of employee duties is carried out at the employer’s expense, within its organizational structure, using its technical facilities and human resources and during working hours. However, the use of knowledge, experience and skills acquired in connection with the performance of employee duties does not mean that the employee’s project is the result of the performance of duties within the scope of the employment relationship. Therefore, it is worth defining the rights to the invention in a written agreement concluded between the employer and the employee, which will set forth who has full rights to the work, who its author is and who can use it, for example, under a license agreement, and specifying all components of remuneration accordingly.

  1. Failure to mark documents as confidential

Documents, presentations, any other materials prepared as part of the company’s operations should be adequately protected. Usually, they are not only intended for internal use, but also presented to potential customers, suppliers, distributors or manufacturers, who do not always have good intentions. It may happen that among them there is a competitor aiming to obtain specific information. It is often the case that, despite the good will displayed at the beginning of the talks regarding cooperation, potential trading partners decide not to undertake it, but are left with the pieces of information that constitute a business secret obtained during the negotiations. For example, in order to acquire a new customer, our client made an extensive presentation, in which he revealed several systematic and analysed data about product features to work out on the market, prices charged by large distributors as well as margins, manufacturing options, the life cycle of products, etc. No cooperation was established between the parties, but it turned out that a few months later the thoroughly discussed designs appeared at lower prices in certain sales channels and originated from the entity that participated in the talks. The company defends itself by saying that its goods are based on the information gathered from publicly available data sources. In fact, such data is available, but collecting it, confirming is accuracy and analysing it required a significant amount of work on the part of our client, and the other party, without making such effort, simply used it for its own purposes.

The principle of limited confidence needs to be applied in this case! Following the identification of information of economic importance for the enterprise, you need to use legal, organizational and technical safeguards in order to maintain confidentiality. It is also necessary to notify the persons to whom confidential information is provided, e.g., in a contract, of such confidentiality requirement. In order to avoid data theft and dissemination, the documents provided need to be clearly marked as confidential and constituting a business secret of the enterprise. You should consider what such documents include, since these may also be sales presentations. It is also worth holding periodic training as regards business secrets for key employees, so that they are aware of how easily they can do harm to their employer. The violation of a trade secret constitutes an act of unfair competition. Therefore, when documents or any other materials have been properly secured, the entrepreneur is entitled to file a number of claims under the provisions on unfair competition. However, in the course of litigation, it should be evidenced that the right holder has exercised due diligence in protecting confidential information, by marking it, holding relevant training and taking other legal and organizational measures.

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