Creation of Intellectual Property Rights

At the outset, one needs to clearly understand the term “ Intellectual Property Rights” or ”IP rights” as it is commonly referred to. These rights relate to those creations of the mind that qualify for protection in terms of the various IP laws enacted in our country, those international treaties that our government acceded to or the common law as developed by our courts. Therefore, unless your cool idea falls within the ambit of the various vehicles that protect IP Rights, the idea may ultimately not be protectable.

The traditional and best known acts used for the creation of IP Rights are the Trade Marks Act no 194 of 1993, Patents Act no 57 of 1978, the Copyright Act no 98 advert7 of 1978 and the Designs Act no 195 of 1993. Apart from the Copyright Act, the other acts all require registration of the IP Rights to ensure successful protection and enforcement. The Copyright Act determines that you, as author of a copyright protectable work, are granted protection in terms of this Act if you comply with certain requirements. You do not need to follow a registration process. However, in the case of registration of copyright in a cinematograph film, you need to use the Registration of Copyright in Cinematograph Films Act no 62 of 1977 to obtain protection.

Apart from these IP Acts, IP Rights are also created in terms of the common law in so far as the protection of goodwill in a business goes. Nowadays the registration and use of domain names are an absolute requirement for businesses. Although not strictly speaking part and parcel of the IP Rights milieu, domain names often contain trademarks. The registration of the domain name creates certain rights for the owner, although the protection of the domain name is more often than not based on traditional principles of IP Rights protection.

These IP Rights, although intangible, are often the most valuable asset of an enterprise. One simply has to look at the value that is placed on international brands or the money spent lately to protect patents relating to the very competitive smart phone and tablet market. It is quite simple, unless you identify your company’s intellectual property assets, you cannot protect it, and unless you protect it, you cannot enforce it.

Enforcement and Protection of Intellectual Property Rights

Once you have created an IP Right, it serves no purpose unless you protect it. To commercially utilise the IP Rights that the State granted you, you need to enforce those rights against any unauthorised user. It simply means policing your market and taking steps against infringing use. The downside is that unless you do it proactively, you stand to lose the very monopoly that those rights grant you.)

All the IP Acts that create IP Rights provide for the enforcement of those rights. The principles are quite simple. The IP Rights holder may take steps to stop any unauthorised use of those rights. The same applies to your common law rights. Any unauthorised use amounts to infringement of your rights.

The IP Rights environment has changed in that a number of acts, unrelated to intellectual property, provide for the protection of IP Rights against unauthorised third party use. One simply has to look at the Companies Act no 71 of 2008 and the protection it grants to trademark owners in so far as company names go. The same applies to the Consumer Protection Act no 68 of 2008 in so far as it protects trademarks in business names, the Code of Advertising Practice that protects IP Rights under certain circumstances and the Counterfeit Goods Act no 37 of 1997 that provides protection against piracy of protected goods, to name but a few.

Once again, unless the IP Rights are protected, you cannot enforce them.

Commercial aspects of Intellectual Property Rights

Once your IP Rights have been identified and protected through a registration process or in terms of the common law, you can start commercially exploiting those rights. Whether your business model is that of a franchisor licensing your IP Rights and know- how to your franchisees, or whether you have a product or service that you sell under your own unique brand, the core of that business is the protected IP Rights. You need to protect your rights by way of solid licence agreements. Such an agreement would provide for the use of the IP Rights, royalties and termination and cancellation of the agreement.

The same principles apply when using a third party’s IP Rights. If your business model is based on being the local licensee of a foreign rights holder, one needs to give special attention to the terms of the licence so as to ensure that your rights are adequately protected. Although you are using a third party’s rights, your user rights should be based on proper protected rights so as to ensure that your market is not overrun by knock-offs or similar branded goods.

Our Trade Marks Act provides for the hypothecation of a registered trade mark by way of a deed of security. This enables a proprietor to offer its registered trade mark to any financial institution as added security for purposes of a loan or any structured deal. Any such lending bank would require that a due diligence be conducted on the trade mark that is offered as security. It would investigate the validity of the registration and would also require a valuation of the trade mark to determine its fair value.

An IP due diligence exercise is normally done when businesses do mergers and acquisitions, listings, restructuring of companies and re-financing. One cannot imagine that any business would not require such an exercise when acquiring a business where the business is a commodity-based and brand-driven company. It would be an essential tool in determining the actual worth of the IP Rights.

An essential part of such a due diligence is a full IP audit. It is often not limited to IP Rights that vest in South Africa. More often than not it includes IP Rights in the rest of Africa or even the world. This audit will identify and confirm all the rights claimed by the company, specifically the validity and ownership of those rights. In many instances, proprietors need to take steps to secure IP Rights, rights that they often thought they always had. This is specifically relevant in the case of copyright in computer software.

IP Rights, as intangible assets of a business, deserve its rightful place on the balance sheet and will enhance the net asset value of a business if properly managed.

Commercial IP services

The creation of IP Rights, the protection and enforcement thereof is but one aspect of the bigger picture when considering the full spectrum of intellectual property in a business. Unless the IP Rights are exploited, it is not fulfilling the role it can play in any business.

If a business is built around manufacturing and selling fast moving consumer goods, it is normally brand-driven. At the outset, the business has to ensure that the brands it is building, are protected through registrations in all the countries in which the goods are sold. All agreements entered into under these circumstances will be guided by one single principle, i.e. how do you protect your IP Rights?

All manufacturing agreements, distribution agreements and licensing agreements, to name but a few, have to protect those very rights. We advise on the IP Rights requirements of those agreements, provide strategic advice on the structuring of the IP Rights in those agreements and proper protection of the rights in those agreements.

We advise on intellectual property aspects of mergers and acquisitions, listings, restructuring of companies and re-financing. We advise on and conduct IP due diligences, conduct IP audits, provide strategic advice on the outcome of such due diligences and audits.

We advise on the impact of the Consumer Protection Act no 68 of 2008 on IP Rights and implement strategies to address the requirements of the Act.

The new Companies Act no 71 of 2008 introduced new requirements when it comes to company names. We advise on the steps to take to protect the adoption and use of trade marks in company names. We provide strategic advice based on the use of IP Rights in domain names, the management and control of domain names and the interplay between domain names, company names and business names.