IP Rights

What does intellectual property law comprise?

Intellectual property law (IP rights) as “industrial property rights” comprise patents, utility patents (the so called “small patent”), registered designs, semiconductor topography rights, plant varieties and trademarks. The individual intellectual property rights are variously regulated in respective Special Protection Laws depending on how they come into being, as well as to the scope of protection, duration and consequences thereof.

Furthermore, IP rights comprise “cultural protective rights”, which are laid down first of all in the Copyright Law 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 Copyright Law 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 lack of creative height (cultural protective rights), general laws remain, the so called law of industrial property and copyright protection 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 keep secrecy.

How do protective rights come into being?

IP rights, especially patents, registered designs and trademarks come into being by being registered at the Patent and Trademark Office. However, this generalisation does not always apply, since some rights, e.g. trademark rights can come into being by use or a mark becoming well-known. The usual way (which provides certain legal security) is registration. This also applies to domain names, etc.

Copyright laws, the law of industrial property and copyright protection 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 sign is not ineffective, but contains a shift in the burden of proof).

Who owns 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 an exploitation right. Moreover, it is often necessary to distinguish between certain personal rights on the one hand, and exploitation rights and rights of use and enjoyment on the other hand.

Are there limits regarding territory and time?

In principle, IP rights for the most part 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 in principle valid only in Germany. This is complemented by the principles of exhaustion – when a trademark has been introduced into the market with the consent of the owner, trademark rights have been exhausted (§ 24 of the Trademark Act). As far as the remaining protective rights (especially copyrights) are concerned, there are special regulations regarding territorial extension.

The duration of protection is regulated diversely. A patent enjoys a maximum protection period 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 in principal possible. As far as trademarks are concerned, they have to be used after a novelty period lasting five years.

What effect and what consequences do intellectual property laws 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 and its sales.

In case of infringement of IP rights, the owner usually has the forbearance right, the right to be informed and (he is entitled to) compensation for damages. The right holder can learn about infringements by means of monitoring measures. The right holder 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.

Licensing and assignment of IP rights?

IP rights can be licensed to third parties simply 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 “simple” licensing enables various licensees to use an IP right in the same territory and at the same time simultaneously. The ownership of the protective rights is not transferred to the licensee, but will remain with original owner. IP rights can not only be licensed to others but also 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 who buys the right, who is responsible for maintaining and keeping up the right, etc.

What strategies must be considered when applying for and defending a portfolio of IP rights?

As yet the majority of IP rights is registered with a very limited idea of how to use it in the future. In many cases there is no comprehensive strategy. Especially individuals as well as small and middle-sized enterprises fear that such strategic considerations will restrict them to certain resources. In reality, however, a strategy planned well in advance guarantees for the success of IP rights management, importantly allowing 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 competitive products terminologically. 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.

A number of 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, it is of main importance how to exploit the right cost-efficiently. 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 already 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/ 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 a market sees the trademark as a statement of quality, the 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 has been continuously distributed under the same (European) trademark during these 20 years, competitors can hardly enter this market even if the patent has expired. Such supporting measures are recommendable especially in 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 so that the maintenance and monitoring of protective rights do not 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 by e.g. training appropriate employees (e.g. at a lawyer or a patent attorney).

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 fallowing 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, law of industrial property and copyright and know-how lead to minor costs in the beginning and in the long run. In contrast to this, IP rights that require 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 consider 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 put 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 “small patent” can be registered in Germany at the expense of approx. € 600 (but: a utility patent is a so-called unchecked protective right, the Patent Office does not check its novelty, etc.).