Attorney-at-Law Michael Horak, graduate engineer (Electrical Engineering), LL.M. (European Law)

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Introduction to intellectual property rights:

  • IP rights (Intellectual Property Rights)
    • What are IP rights?
    • How are IP rights obtained?
    • Who is the proprietor of intellectual property rights?
    • Are there limits regarding territory and time?
    • What effect and consequences do intellectual property rights have?
    • Transfer of IP rights?
    • Management of IP rights
    • How to optimise the management of IP rights
  • Management (planning, marketing, administration)
  • Strategies (registration, exploitation, maintenance, monitoring)
  • Domain names (finding a name, registration, defence).

IP rights:

Basic information on commercial and cultural legal protection:

The term intellectual property rights is a general term which comprises numerous individual rights, this generalisation being quite unclear since there are substantial differences between patents (technical inventions) and copyrights (e.g. cultural, personal, intellectual creation) as far as legal content and effectiveness are concerned. Yet, different IP rights still have many similar aspects, e.g. as far as their purpose or monopolisation in favour of individuals are concerned. Moreover, the term intellectual property does not mean that human thoughts can be monopolised. On the contrary, ideas as such cannot be protected. Rather, this reflects the immaterial character of such rights.

Although the existence and relevance of IP rights is underestimated because they are immaterial and characterised as “right” even nowadays, they have become a central value of many undertakings and innovative developments.

What are IP rights?

Intellectual property rights (IP rights) comprise patents, utility models (the so called “petty patents”), registered designs, semiconductor topography rights, plant varieties and trademarks. The individual intellectual property rights are variously regulated in respective Special Protection Laws. The differences concern their emergence, scope of protection, duration and legal effects.

Furthermore, IP rights comprise “cultural protective rights”, which are laid down mostly in the Copyright Act and which aim at protecting the personal intellectual creation of an author.

Computer programmes as such are at the moment not patentable, but they have been explicitly included in the Copyright Act in spite of many criticisms.

Even if no protective laws apply due to the lack of official registration (intellectual property rights) or due to the insufficient level of creativity (cultural protective rights), general rights remain, the so called performing rights are applicable, which are derived from the Act against Unfair Competition - the holder of the right can take action against the unfair exploitation of his accomplishments.

These general laws also comprise trade secrets and manufacturing secrets (know-how), which are partly of industrial and partly of “cultural” character and which are “protected” especially by keeping secrecy or by an arrangement to maintain secrecy.

How are IP rights obtained?

IP rights, especially patents, registered designs and trademarks come into being by being through registration at the Patent and Trademark Office. However, this generalisation does not always apply, since some rights, e.g. rights under trademark protection can come into being by use or when a brand becomes well-known. The usual way, however, is registration.

Copyright, performing rights or know-how are not eligible for registration; they come into being automatically when a work is created and the legal requirements are met (attention: according to § 10 of the Copyright Act the copyright notice is not ineffective, but contains a shift in the burden of proof).

Who is the proprietor of intellectual property rights?

IP rights usually belong to the inventor or the author. However, there are exceptions. Under the Act on the Right in Employee Inventions and the Copyright Act, an employer can own the exploitation right.

Are there limits regarding territory and time?

IP rights mostly provide for the so-called principle of territoriality. This means that IP rights (arising from registration) are valid only in the country in which they were registered. Thus, a trademark registered in Germany is valid only in Germany. This is complemented by the principles of exhaustion - when a trademark is introduced into the market with the consent of its owner, trademark rights are exhausted (§ 24 of the Trademark Act). As far as the remaining protective rights (especially copyright) are concerned, there are special regulations regarding territorial extension.

The duration of protection is regulated diversely. A patent enjoys a maximum protection of 20 years, owners of patents in respect of pharmaceuticals can obtain further five years of protection by means of a supplementary protection certificate. Contrary to this, trademark protection can be extended every 10 years, which means that unlimited protection is possible.

What effect and what consequences do intellectual property rights have?

Each IP right gives its owner exclusive possession, ownership, utilization and exploitation rights. IP rights are monopolist rights and serve the purpose of protecting the product.

In case of infringement of IP rights, the owner usually has the forbearance right, the right to be informed and he is entitled to a compensation for damages. The holder of the right can learn about infringements by means of monitoring measures. The holder of the right is practically forced by law to sue persons who infringe his rights, since the existing claims can otherwise be forfeited. For example, if somebody does not take action against trademark infringement within a period of five years, he loses the right to take prohibitory action against the infringer, if the latter points out expiry of this right.

Transfer of IP rights?

IP rights can be licensed to third parties generally or exclusively, but in principle they are also suitable for a transfer of rights (sale and assignment). As “rights”, the IP rights provide the possibility of licensing: The owner entitles a third party to use or exploit the right without ceding ownership. Licensing can be exclusive or non-exclusive. An exclusive license entitles only the licensee to exploit the IP right, usually within a certain territory (e.g. a state). Non-exclusive, so-called “general” licensing enables various licensees to use an IP right both in the same territory and at the same time. The ownership of the protective rights is not transferred to the licensee, but will remain with the original owner.

IP rights can not only be licensed to others but can also be completely transferred to others. In this case the original owner loses almost all rights, except for personality rights in certain cases. In contrast to licensing, in this case it is the party buying the right that is responsible for maintaining and keeping up the right, etc.

Management of IP rights

When most IP rights are registered it is still unclear how they will be used in the future. In many cases there is no comprehensive strategy. As a result, many individuals as well as small and middle-sized enterprises fear that such strategic considerations will lead to shortcomings in intellectual property resources. In reality, however, a strategy planned well in advance guarantees for the success of IP rights management. It is also important that such a strategy allows for a cost-benefit analysis.

If, for example, a middle-sized company asks itself whether to patent its first technical invention, which it is keeping secret at the moment, it must be considered that patents are published and are thus open to a broad public. Equally, costs for application and maintaining the patent must be considered. An alternative possibility might be keeping the invention secret and exploiting the know-how resulting from it.

It can be a good idea to apply for and register a trademark for an end product that is based on this know-how, so that this product stands out from competitive products as far as its designation is concerned. Which of these alternatives will be less costly can not be generally predicted, since a patent has numerous advantages over know-how protection, as it allows to monopolise the invention for the protection period of 20 years.

Numerous other aspects are important as far as the strategy is concerned: application or non-application for IP rights, management of IP rights as well as information on protective rights of e.g. competitors are issues to be considered when planning the strategy. In the first place, however, a cost-effective protection of the right is crucially important. In this context, territory and time have to be regarded. If it is planned to distribute a certain product in other European countries in the long run, it is generally recommendable not only to consider applying for a German trademark, but also for a European Community trademark. The same may also apply for the company name as far as the distribution of services and trademarks over the internet is concerned.

How to optimise the management of IP rights?

Almost every enterprise is an owner of at least one IP right (company name, business terms) and usually a number of further potential IP rights (e.g. company logo, advertising materials, trade and manufacturing secrets, other cultural and technical methods of resolution, etc.).

The management of IP rights involves among others gathering all existing or potential rights, clarifying ownership issues (company, company owner, employers, freelancers, clients, contractors, etc.), stating the (possible) duration of protection, the territorial extension of protection (typically Germany, German-speaking countries, Europe, etc.), possibilities of exploitation (self-production, self-distribution, granting of licence – not exclusive or exclusive). The first step involves gathering all existing rights and their revision under preceding premises. Then, in connection with the existing IP rights, the question should be answered, if the existing rights have been sufficiently secured by means of supporting measures.

For example, Europe-wide distribution of a certain product, which – in Germany includes protected elements due to a German patent – can be secured in conjunction with a European Community trademark. As soon as the market sees the trademark as a statement of quality, active patent protection often plays a minor role, especially in the long term. In addition, patent protection expires after 20 years.

However, if a product is continuously distributed under the same (European) trademark for 20 years, competitors can hardly enter this market even if the patent has expired. Such supporting measures are recommendable especially in the core areas of a business.

When securing existing protective rights, the question has to be raised, if e.g. further protective rights should be applied for or whether potential protective rights exist, the exploitation of which (i.e. securing the right) appears recommendable when comparing costs and benefits.

A further management issue concerns the administration of IP rights. It is convenient for a patent holder to engage professional administrative firms, patent attorneys and attorneys-at-law lest the maintenance and monitoring of protective rights should fail because of missed deadlines or delayed payment of renewal fees. On the other hand, there are protective rights which require almost no administrative efforts at all – professional administration would not pay in this case. Instead, it is better to make your own administration professional e.g. by training appropriate employees (for instance, at a law or a patent attorney office).

Costs constitute a central aspect of the question which IP rights are really required by a company or an individual. In addition, the bigger the company, the more rights typically exist, some of them, however, will never be exploited. It is usually of no use for a middle-sized company or an individual person to maintain a vast number of fallow IP rights. In exceptional cases, it can be useful to register a certain protective right and not to exploit it, namely in order to pre-empt a competitor. IP rights that are not subject to official registration, such as copyright, performing rights and know-how lead to minor costs. In contrast to this, IP rights that require an official registration, cause costs resulting from research, as well as from application fees, examination fees and lawyer’s fees. Furthermore, if any costs may arise from a communicating lawyer, e.g. for a trademark registration in the U.S.A. or in Japan (national address for service), it is important to keep in mind all these expenses in advance when considering a registration – follow-up costs, further legal fees, annual fees, renewal fees, travel expenses and other. A simple registration of a patent puts you to the expense of approx. € 2000 (legal fees and patent office fees), middle cases typically amount to € 3000 and a complicated patent registration can easily reach expenses amounting to € 5000. This applies to a German patent. In case of an international or a European patent the expenses are significantly higher.

Contrary to the above, a so-called “petty patent” can be registered in Germany at the expense of approx. € 600 (but: a utility model is a so-called unexamined protective right, the Patent Office does not check its novelty, etc.).

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