Open innovation – time to dispense with intellectual property rights?

First of all: open innovation – what exactly is it? It would be almost wrong to discuss open innovation(OI) without mentioning the man who coined the term.

Professor Henry Chesbrough (Haas School of Business, University of California, Berkeley) created the term open innovation back in 2003 to describe the conscious input and output of knowledge in order to accelerate internal innovation and to expand markets for the external application of internal innovations. This could involve companies and organisations inviting other parties to join their innovation processes rather than relying solely on their own R&D departments and other in-house resources. These companies and organisations have come to realise that they are not capable of possessing absolutely all necessary expertise in-house and that R&D and time-to-market can be sped up by working with others.

But what’s new here? Companies had been co-operating with each other, with customers and suppliers, licensed both in and out, and established joint ventures long before the concept of OI came into being. What has emerged in recent years is a growing realisation among organisations that they need to be humble enough to concede that they do not always know where to find the best expertise and/or partners in order to solve their challenges. And so they have started to approach “anyone”.

This shift is particularly conspicuous where companies conduct their OI processes as online competitions, by far the most common form of OI. The company (the “problem-setter”) is able to identify expertise and new partners without ever having met these potential “contributors” to the OI process and to the solution to the problem. This makes for a topic-based OI process, which means that the topic of the problem is known, while the potential contributors, or entrepreneurs as they are usually called in this context, are not defined. Completely open innovation occurs if the problem, too, remains undefined, i.e. we know we need help, but we don’t quite know what we need help with. This is perhaps where the greatest potential can be found.

How should we approach intellectual property rights during the OI process? What does the word open mean in this context? Open to whom? Many of those working with OI seem to believe that OI allows you to completely disregard everything to do with intellectual property rights. One of the reasons for this misconception is presumably that another misconception has arisen, whereby it is thought that open source is not subject to intellectual property rights and then applying this notion to OI as well. Well, the meaning of open in the context of OI is first and foremost that the problem-setter opens its doors to the world by suggesting a collaboration.

Once the step has been taken to open up, there are a number of factors to consider. For example, how do you deal with the so-called “background information” that both the problem-setter and contributors bring into the process? What should they share with each other? What should they do about know-how? What should be considered business secrets? The consequences of inviting “anyone” is of course that absolutely anyone can become a contributor – which is the most significant distinction between OI and traditional partnerships. New types of collaborators emerge, and new questions subsequently arise. The competitive element also attracts a great number of individuals. Are these individuals at liberty to contribute? Or are they bound by other contracts and/or employment terms in respect of the innovations that they contribute to the OI process in question?

IP contamination is another major concern. What would happen if, say, one of the contributions contains the same invention that the problem-setter has in the pipeline but has yet to patent or protect in some other way? A big business faces a significant risk of being accused of theft from the individual if it chooses to proceed with the invention/product at a later stage.

In order to protect intellectual property created during the process, it would be sensible to set out rules for how to do this before the process starts. Not in detail, as this may restrain the process, but in general terms so that the parties know how to act, how ownership rights will be defined, and not least so that the parties do not create obstacles early on in the process that may prevent them from acquiring IP rights at a later stage. So the important thing is to think ahead about the way in which “foreground information” – that is the flow of information occurring during the actual process – is handled by the parties involved.

If a decision is made not to acquire intellectual property protection and to define the word open as meaning that nothing created during the OI process should be “locked in” by intellectual property rights, it is still important to ensure that no party outside the sphere, a third party, is able to lock in what has been created. Attention must also be paid to third party rights and to the entity’s own freedom to operate in order to avoid unnecessary infringements on another’s intellectual property rights.

The benefits of inviting new expertise and new collaborations can be phenomenal, as it allows existing challenges to be solved and peripheral innovations to be taken to new markets. The key is to think ahead in order to minimise the risks and maximise the benefits of open innovation.

Cecilia Svantesson, Patent attorney

The 2014 World Cup from an IP perspective

Football enthusiasts all over the world indulged in the fantastic spectacle of the World Cup in Brazil this summer, enjoying a large goal average (2.88 goals per group stage game), witnessing flabbergasting results (e.g. Spain vs. the Netherlands 1-5 and Brazil vs. Germany 1-7) and reading everything about the headline-making profiles such as Neymar, Suarez, Rodriguez, Robben and Müller. Eventually, as you all know, Germany won their 4th World Cup title.

As a devoted patent attorney, I cannot escape from the thought of the important role IP plays on the pitch (well, perhaps it shouldn’t be construed as the 12th player, but you’ll see my point soon). For example, does the beautifully composed preamble of patent application US2012148741 ring any bells? “A foaming composition for generating temporary foam-made indications used for marking lines and/or areas to be clearly visualized during a limited period of time and then disappearing without leaving any residues or traces…” A great story lies behind this application: the (alleged) inventor of this “vanishing spray” is the Argentinean journalist Pablo C. Silva (seems like a great name for a football player, too). During a football match, Silva had a free kick blocked by defenders rushing towards him. When driving home later after losing the game, Silva thought he must invent something to stop this, eventually leading to the efficient spray now used by many referees.

What about the balls? Needless to say, they are the subject of many patent applications and patents. Adidas AG is the proprietor of US8529386 which reveals the technology leading to the making of the Brazuca match ball. People with expertise in the field say that the ball flies true and doesn’t knuckle anywhere near the extremes that its predecessor managed, making life a bit easier for the goalkeepers. It should be noted that during the World Cup, the Mexican Institute of Industrial Property (IMPI) reported a confiscation of 4,000 fake versions of these Brazuca balls. Furthermore, IMPI reported that in addition to this, two containers with almost 17,000 (!) fake Brazuca balls were retained since a previous confiscation. Enough is enough.

For supporters, the recently published Brazilian (surprised?) utility model BRMU9002206 “Camisa de futebol com dispositivo musical” discloses a football shirt with an incorporated electronic musical device which plays the hymn of the shirt’s team or country. Indispensable, if you ask me.

With the ever-increasing development of football gear and materials, it is of vital importance to obtain protection for the innovations associated therewith. Furthermore, considering that games may attract up to a billion television spectators, the possibility for multinational companies to expose their brands is paramount. Hence, IP plays a vital role in football and means big business – just as Neymar.

Love Koci, Patent attorney

New Trademark Act in force in China since 1 May 2014

The intention of this new Act is inter alia to go after trademark infringers and strengthen the position and ensure a fair market for trademark holders. This blog will mainly focus on some of the changes in the application procedure.

Some of the more significant changes are:

  • the introduction of a multiple class application system
  • increased protection for well known marks
  • an increase in statutory damages
  • shortening of the application procedure
  • possibility to protect more types of signs

The possibility to include more than one class in a trademark application is of course a significant improvement compared to the previous single class system. This will most likely lower costs and speed up the application process. Due to the multiple class system the principle of a reexamination notice is reintroduced. The reexamination notice allows the applicant, upon request from the examiner, to describe or amend the application. If obstacles then remain and the application is partially rejected a divisional filing can be made, which will allow an applicant to move forward with a new amended application but with the original filing date intact.

Further, protection for well known marks is strengthened, as it is now possible for a holder of a well known mark to prohibit use of the mark even on dissimilar goods if the use is likely to cause confusion, i.e. ban others from registering their trademark or using similar ones. A trademark can, based on the holder’s request, be defined as well known, when the facts of the relevant case supports such a conclusion. It is no longer allowed to use the phrases “well-known trademark” or “renowned trademark” on goods, packages, in advertising or other commercial activities. This amendment makes the “well-known” criteria open only to them who can actually show that their trademark is well known to the relevant consumers. Bearing in mind that Chinas’ population is well over 1.3 billion people, it could be rather tricky for producers of consumer goods to establish that their mark is well known.

In close connection to the above it is now also regulated in the new act that the use of other’s registered trademarks as trade name is prohibited. There is now also a connection between the trademark act and the unfair competition law, and combined they regulate that the use by a third party of a registered trademark or a well-known unregistered mark as trade name constitutes unfair competition.

In order to raise the stake for intruders the maximum amount of compensation for statutory infringement is raised to RMB 3 million (slightly below USD 500 000) which is six times the previous maximum amount. The burden of trademark holders to provide proof of infringement is mitigated and instead the alleged infringers must now at the court’s request provide documents, such as e.g. account books, to assist the determination of damages. Otherwise, they are facing the risk that the compensation could be determined according to amounts proposed by the trademark holders. This of course indicates that the Chinese authorities are getting increasingly serious in dealing with trademark infringements and they will be more consistent with international practice.

A statutory time limit for examination has been implemented. The Chinese Trademark Office’s (“CTMO”) preliminary examination period of a trademark application is shortened and should now not take longer than 9 months, followed by a possible review (within an additional time frame of 9 months) by the Trademark Review Adjudication Board (“TRAB”) of the CTMO’s rejection of a trademark application. Similar time limits are also in place for oppositions, invalidations and cancellations.

Further, it is now possible to register sound as a trademark, as long as they can be recognizable and distinguish mark owner’s goods from others. An applicant however, must provide a musical sample together with an explanation how the sound mark is used and also describe the sound mark by either a staff or numbered musical notation with literal explanation. The act expressly mentions sounds as an example but this is followed by the Chinese sign equivalent to “etc”, hence, this is not exhaustive and another example mentioned is registration of single colour marks. And just in case anyone should come to think of trying to register certain hymns as sound marks: the list of prohibited signs is expanded with the Chinese “national anthem” and “military song”. In line with the explanation of a sound mark an applicant of a 3-D mark must also explain how the 3-D mark is used inter alia by submit a specimen by which the 3-D shape can be determined, the specimen must contain at least three view drawings of the 3-D mark.

All the above noted changes in the new trademark act is as mentioned done to strengthen the position of trademark owners and speed up and otherwise promote the application process. It remains yet to be seen how the new trademark act will be handled in practice by authorities and courts.

Peter Hermansson, Attorney at Law