This is a new story in ExportWise’s ongoing series aimed at helping small- and medium-sized enterprises (SMEs) with the “practical side of exporting.” Learn more from our other features on document authentication and international banking.
Intellectual property (IP) may be a SMEs most valuable asset. Companies considering exporting are well advised to develop a global IP strategy that dovetails with their business strategy.
Stephen Beney, president of the Intellectual Property Institute of Canada (IPIC) and partner at Bereskin & Parr LLP, says it’s important for SMEs to understand that IP rights, such as patents and trademarks, only apply in the territory of the granting jurisdiction. For example, a patent granted by the Canadian Intellectual Property Office (CIPO) has no effect in any country except Canada.
To obtain IP rights in foreign markets, companies need to file for protection in each desired market. This provides a patentee with the right to exclude others from making, using, and selling their invention within the jurisdiction granting the patent, explains Beney.
“Patents can provide patentees with market exclusivity and can be used to prevent potential competitors from entering those same markets. Used as a barrier to entry, patents can provide a significant commercial advantage by keeping the presence of competitor companies at a minimum, thereby providing an opportunity to become a market leader in a jurisdiction,” he says.
“Make sure that you own your IP. Take the necessary steps to secure the rights that you have, and ensure you’re not infringing anybody else’s IP,” says Mark D. Penner, a partner at Fasken Martineau DuMoulin LLP who focuses on the strategic use of intellectual property assets in Canada and around the world.
While protecting intellectual property is advised, registering IP rights can be expensive, cautions Penner.
“If you want to conquer the world and register in many jurisdictions, that’s a very, very expensive endeavour. The first thing is to realize that time and money are limited, so you have to be strategic about where you want to go,” he says.
He suggests companies considering entering the export market should determine their global strategy, along with an IP strategy that dovetails with their international business plan.
“Think about the most cost-effective IP strategy: what makes sense in the long-term?”
For most Canadian companies, their biggest market is the U.S., where the system is very similar to Canada’s.
“But many other jurisdictions like Europe, China, and Japan may not be based on the same system that we have in Canada,” he says. “The difficulty is if you don’t do certain things at the start, it can be costlier and more time consuming to correct errors later than to seek professional advice before exporting to a country where the company’s IP is not registered,” says Penner, one of the authors of the 2016 Fasken Martineau IP Survey: A Temperature Check.
“Patent applications and industrial design applications are applied for on a first-to-file basis, effectively resulting in a race to the patent office,” says Beney. “In a first-to-file system, if someone files for the same invention before you, your invention is no longer new; the earlier filings of people other than the inventor for the same invention can and do frequently create a problem,” he says.
He recalls an example where a company allowed an inventor to publically disclose an invention at a trade show before filing for a patent protection. In Canada and the U.S. there is a grace period that gives an inventor 12 months after a public disclosure of their invention to file a patent application, but Beney points out that in many other countries this is not the case. Because of the inventor’s public disclosure, the company was not able to secure patent protection in several key international markets.
First-to-file can also apply to trademarks.
“If you find another company or individual has already registered your trademark, this can prevent you from registering your own brand, but in a further complication, the current owner of the trademark may now actually control your ability to manufacture and sell your product in that country,” says Beney, alluding to this practice as ‘bad-faith trademark filing’ or ‘trademark squatting.’
“It can be difficult, costly, and time-consuming to have a bad-faith registration cancelled,” he adds.
Penner reiterates the advice to “think early on about what your ultimate game plan is, because it’s far cheaper to register a mark in a country like China, grow your business, and then export to China, than it is to grow a brand and then discover that some trademark squatter has registered your mark in China.”
Companies often don’t consider that enforcement of IP rights in foreign markets can be expensive, says Beney. He points out that SMEs operating in export markets need to have an IP strategy in place that is based on an understanding of not only the value of having IP in those jurisdictions, but also the costs of enforcing those rights.
In addition to companies looking at their own IP, they also need to be aware of existing competitive IP rights in target export countries.
Beney says researching the existence of these rights should be done early in the planning phases.
“Time, money, and other resources spent designing and manufacturing packaging, marketing material, and other promotional items may be irretrievably lost should problematic third-party rights become known after a market has been entered,” he says, warning that violation of the patent rights of others may result in an injunction prohibiting all sales in that export market.