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Intellectual property in a global marketplace.

Owners of intellectual property must have a sense of the value of their assets in a world market and how to secure proper protection on an international basis.

A crucial aspect of international business is the emerging effect of international intellectual property on the market. Products move quickly across borders, but the fastest moving property is intellectual property. As quickly as a fax or a phone call, this property moves around the world. Just as products must be packaged to prevent damage, intellectual property must be protected against damage.

Without adequate protection for their intellectual property, American firms can be undercut by foreign competitors. Production can be stopped, counterfeiting can ruin the local market for the genuine product, and the investment in technology or advertising may be stolen. American firms must protect their intellectual property in order to avoid these pitfalls, in order to maintain equal footing with other international companies, and in order to fully develop various foreign markets.

Intellectual property includes a variety of types of protection. For most companies, the two most important are patents, which protect inventions for products and processes, and trademarks, which protect the name, appearance, and even sometimes the method of selling a product. Also included are copyrights, which cover works of art and publications (including computer programs), and trade secrets, which protect information that gives a business advantage, such as formulae or customer lists.

For the most part, trademarks must be registered to be protected, and patents must always be secured for the invention to be protected. Copyrights and trade secrets, on the other hand, can be protected to a certain extent without formal registration. Intellectual property protection is not without cost, but the cost of registering trademarks or filing patents is far less expensive than the consequences of not filing.

The newspapers are rife with stories about foreign companies that locally registered famous trademarks of United States companies. In one case, a sponsor of the U.S. Olympic team was enjoined from having the team use its clothes in the Barcelona Olympics. In another case, a famous shoe manufacturer had to wage a costly five-year legal battle to recover its mark in Brazil. In yet another case, a company whose source of product was in Hong Kong was enjoined from attaching labels with its mark to its products in Hong Kong before shipping; the extra cost of unpacking the goods when they arrived in the U.S. - in order to attach the label - removed any profit from the sale. These examples represent only a fraction of the vast number of these types of cases currently in existence.

Where to File?

To prevent these problems, the trademark must be registered. There are approximately 120 jurisdictions where a mark can be registered. This can be an expensive process, and decisions must be made as to where to file to avoid unnecessary expense while still protecting the trademark.

It is usually recommended that a company file in three types of jurisdictions:

* First, those jurisdictions that are or can be significant markets; the company will then always be able to sell there and stop others from selling there.

* Second, those jurisdictions where the company will manufacture; this ensures an uninterrupted source of supply.

* Third, those jurisdictions where the products are usually counterfeited.

In this way, when counterfeits are found in a number of countries, one suit may be brought where the counterfeiter is found in the country, instead of many suits wherever the counterfeit products are being stored or sold.

Obviously, these recommendations must be tailored to the specific trademark, products, and budget involved.

Protection of trademarks does not stop at their registration. A trademark owner must be vigilant to find and stop others who have registered similar marks or who are using similar marks. There are services that will look for and report the others who try to register a mark so that action may be taken.

However, to properly find and stop others who are using the mark, the company's sales force or distribution system must be involved. The sales or distribution personnel must be trained to report these infringements so that action can be taken where appropriate. However, once again, a decision must be made as to where to take action. Many companies with famous marks have found that vigorously pursuing all infringers can wipe out the profit of the most famous of marks. Strategic decisions must be taken, and a plan must be developed to properly protect the mark from infringers while still remaining in budget.

The types of losses that can occur because of a lack of patent protection are different than those of trademarks, but they can be just as costly. While it is unusual for another to register a patent and use the patent against the true inventor, there are other ways the lack of patent protection can be exploited.

In one instance, patents for a fetal electrode were only filed in the U.S. A thriving business was developed in the U.S., but the business stopped at the border. Abroad, the competition was too great because other manufacturers were able to make the same product without violating the patent.

Considerations for Patents

The three types of jurisdictions that should be considered for trademarks should also be considered for patents. In addition, for patents on a process, the company should consider filing in those countries where its main competitors manufacture; in this way, the company will be able to stop those competitors from using the process in their home country and then selling the product or the process in other countries in competition with the patent owner.

The enforcement of patents is also different than the enforcement of trademarks. Usually, patent enforcement need not be vigilant, except as the marketplace demands. Many companies enforce patents only when their sales force or licensees insist. Others use patents as an offensive tool to create a market and to keep an advantage over competitors.

The owners of intellectual property must have a sense of the value of their assets in the global marketplace. Dollars spent on research and development, advertising, and marketing to develop brand and name awareness may be wasted if proper protection is not secured on an international basis. For both patents and trademarks, the primary markets in which protection should be secured are where the product is sold, where there is a strong likelihood that the product will be sold, where the product is made, where there is a likelihood of counterfeiting, and where the competitors are. A well thought-out program can be the key to expansion in the global marketplace.

Ethan Horwitz is a Partner in the firm of Darby & Darby PC, which specializes in all phases of intellectual property law. Based in New York, he represents a wide variety of clients in patent and trademark litigation around the country and the world. He is the author of the treatise, World Trademark Law and Practice and a co-author of Patent Litigation: Procedure and Tactics.
COPYRIGHT 1993 Directors and Boards
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Horwitz, Ethan
Publication:Directors & Boards
Date:Jan 1, 1993
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