Macpherson Kelley Special Counsel Mark Metzeling discusses why implementing an appropriate business structure and strong Intellectual Property protection strategy is critical to business success. Mark gave a seminar presentation on this topic for Legalwise Seminars.
It’s never too late to review a client’s business structure and determine whether it is suitable for what they are seeking to achieve from their business.
How a client’s IP is owned will impact:
- whether third parties want to invest in the business;
- the profitability of the business;
- how much tax the client will have to pay when the business starts making a profit.
Always discuss the structure of a client’s business prior to applying to secure any IP rights.
One common, simple and effective structure for some businesses is the creation of three companies for a client:
- Holding company;
- Asset owning company, which is a wholly owned subsidiary of the holding company;
- Trading company, which is also a wholly owned subsidiary of the holding company, though it has no direct relationship with the asset owning company.
The advantage of this structure is that it isolates the assets of the business, including any IP rights, and may protect them from any adverse event (e.g. litigation from creditors, employees or regulators such as the ATO) that may affect the trading company.
Provided the appropriate licences and other agreements are in place (e.g. service agreement and IP licenses), this structure enables profits to be transferred from the trading company to the other entities for asset protection and flexibility to divest the business assets for expansion or to attract investors.
Once a client’s business structure has been reviewed and set up, it’s time to formulate and then implement a strong IP protection strategy.
This will usually involve the filing of applications for trade marks, designs, patents and/or copyright registration (in some jurisdictions) in Australia and potentially overseas.
While there are many similarities between overseas jurisdictions and Australia, there are peculiarities that may impact on how a client goes about protecting their IP. Accordingly, it is necessary to develop a trusted relationship with overseas associates who can advise on how to best to protect IP in their countries.
Once an IP protection strategy has been implemented, it’s important to maintain that strategy by monitoring for breaches and examining the options for enforcement should breaches occur.
Tips and practical advice on enforcing IP rights:
- Secure IP rights as early as possible
- Have an understanding of what is and what isn’t protectable as a trade mark, design, patent, plant breeder’s right, electronic circuit layout, copyright, trade secret – this will ensure a client doesn’t waste money on protecting IP that isn’t important to their business.
- Have employees enter into restraints of trade and confidentiality agreements as a part of their employment contracts.
- Have service providers, distributors and other third parties enter into appropriate agreements that contain provisions relating to confidentiality, non-circumvention conduct, restraints of trade and IP ownership/use.
- The correct IP symbols should be used on websites and other customer interface mediums: TM, ®, ©, Patent No.123, etc.
- An IP rights notice should be placed at the bottom of every webpage/customer interface medium.
- Include an ongoing budget item for IP enforcement and protection.
- Have a template letter of notification drafted which can be sent to competitors, which sets out a client’s rights and doesn’t constitute a letter of demand.
- Maintain a watch on trade marks being filed by competitors.
- Act swiftly and with purpose – if a third party is infringing a client’s IP, be prepared to act and follow through with court proceedings.
- Customs enforcement – in Australia and overseas.
Mark Metzeling is the highest-ranked Queensland lawyer for trade mark prosecution and strategy. He is a qualified solicitor and registered Trade Marks attorney, who has a Masters of Intellectual Property Laws, a Master of Laws and a Bachelor of Applied Science (Biochemistry). Mark is an expert in intellectual property strategy, brand protection and securing Trade Mark rights. Contact Mark at Mark.Metzeling@mk.com.au or connect via LinkedIn .