There are many risks when starting a small business. Typically entrepreneurs wrestle with finance, bureaucracy, skills shortages and a raft of logistical and operational issues before they make it ‘big time”.
But creative entrepreneurs and investors have another cross to bear. They must take steps to protect their intellectual property, loosely referred to as the product of human intelligence and creation, such as copyright works, patented inventions, trademarks and registered designs.
‘An entrepreneur who is inventing new products may need to obtain a patent to protect his invention from being made or sold by a third party,” says Lesley Fitton, a partner at the law firm Webber Wentzel.
‘Any unique aspects of the design or appearance of the product may be entitled to registered design protection. The brilliant name he plans to use for the product will need to be registered as a trademark to stop competitors from using the same or a similar name for any imitations (and probably also as a domain name too) and any artistic work used in the product get-up may be entitled to protection as a copyright work,” Fitton says.
There are a number of simple steps a start-up can take to prevent intellectual property shocks, she says. ‘You should come up with a distinctive name, make sure the name is available for use and registration as a company or close corporation name, as a registered trademark and also as a domain name.
‘Three different registers record rights in these different name forms,” says Fitton. ‘The entrepreneur should avoid getting into a situation where he obtains a company name registration for a name, but finds out later that someone else owns a registered trademark for the same or similar name.”
A comprehensive due-diligence investigation during the start-up phase will ensure entrepreneurs aren’t faced with costly litigation for trademark infringement at a later stage. Far too many small businesses register their name as a company or close corporation with the Companies and Intellectual Property Registration Office (Cipro) without first making sure the name is available as a trademark.
The entrepreneur must also check that the domain name is available. Sunk costs and accumulated goodwill go up in smoke when the owner of a trademark orders an entrepreneur to stop trading under his mark. Existing businesses should conduct an audit of their intellectual property, regardless of their size or the sector.
Inventions and creative processes are valuable assets and securing and protecting intellectual property are essential for long-term business success. The challenge to inventors and creative entrepreneurs is to ensure their ideas aren’t stolen.
They need to identify the different types of creative works used in their business and seek advice on how they might be protected by South Africa’s intellectual property laws, for instance, by patent or trademark registration, as copyright rights, or registered designs.
Inventors face a unique set of challenges, because they have to protect their intellectual property from the prying eyes of potential financial backers and business partners. The best tool for such protection is a patent — an exclusive right granted to the inventor of an invention.
If an entrepreneur is satisfied his ‘widget” or new way of doing something is novel, inventive and not obvious, he can secure an exclusive right to prevent others from commercially exploiting the idea for 20 years.
‘Since novelty is an essential component of an application for patent protection. It is essential that the details are kept a secret until patent protection has been secured (subject to disclosing those details to a patent attorney), otherwise you will destroy its novelty,” says Fitton.
The first step in protecting an invention is to contact a patent attorney who will assess whether the idea is worthy of protection and then begin the patent applicationprocess. Things become more complicated when an entrepreneur decides to share the idea with a business partner or financier.
‘You should never approach a business partner or finance house until after you’ve seen a patent attorney because sharing the idea with them prior to embarking on the patent process impacts on its novelty,” Fitton says. In some cases the entrepreneur may want to present his idea to a business partner or financier to secure commercial backing for its exploitation.
The entrepreneur should request them to sign a confidentiality agreement, which is a legal contract between the entrepreneur and the business partner or financier acknowledging that the idea has been presented to them and in which they undertake not to disclose information that has been shared with them or copy the idea.
The entrepreneur must be careful when drawing up this document to ensure the purpose of the discussions is correctly laid out. Because there is no ‘one size fits all” confidentiality agreement, it is best to seek legal assistance when drafting it.
Once it has been agreed to and signed, a record of what was disclosed at subsequent meetings must be kept. When intellectual property rights are infringed, an entrepreneur can seek a court interdict to have it stopped and also claim damages.
If the infringement amounts to counterfeiting, criminal proceedings may be possible in terms of the Counterfeit Goods Act of 1997.