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Are intellectual property rights redundant in a downturn?

Byline: David Ward

In tough times, IPR spend (e.g. patent, design and trade mark filings) decreases, whereas litigation and enforcement spending increases. This partly reflects rights owners focussing on existing market share when new opportunities are scarce and perhaps less reticence of firms to risk infringing third party rights.

This has consequences for everyone: rights holders need to be more vigilant.

Ideally, infringement should be identified and stopped as quickly as possible. Caught early, issues can normally be resolved quickly and cheaply. Worst case scenario is when an infringer has invested so much that they can't back out easily - you may win eventually, but at what cost? Reputation is important for rights holders. If you take no action against those who infringe your rights, it may embolden others to follow suit. Sending out "warning" letters to potential infringers without following through is tantamount to "crying wolf". If no one believes you are serious the ultimate cost of enforcing your rights will likely be higher.

In contrast if you have a reputation for vigorously enforcing your rights, wouldbe infringers are left in no doubt about the potential consequences of their actions.

Although this requires robust action at some point, the deterrent effect is likely to result in lower overall enforcement costs.

Often the validity of the rights themselves are in dispute, and having a strong reputation may sway the other party into reaching a settlement rather than litigate.

But what about the other side of the fence? Accusation of infringement by a rights holder does not make you guilty! What should you do if accused? Get professional advice and certainly do not ignore the issue hoping it will vanish. If you have unwittingly infringed someone else's IPR, a promise to stop may be sufficient to diffuse the situation. If you are considering making or selling new product lines (or selling into new markets) think about your "freedom to operate" and consider seeking professional advice. This is particularly important if start up costs are significant or commitments have been made based on continued supply of the product.

It is less important if the consequences of stopping manufacture/sale are merely inconvenience (action is likely initiated to exclude you from the rights holders market, pursuing damages in most situations is not financially viable, so once you undertake to stop infringing it is normally the end of the matter). If you are knowingly risking infringement, bear in mind that the potential consequences not only include damages but also delivery up and destruction of stock.

Thus, Intellectual Property Rights are arguably even more important to enforce and observe in a downturn.


David Ward, partner, Marks & Clerk
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Oct 27, 2011
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