Winning the race

22:41, Dec 13 2012
Winning the Race

Should I put money into being first to market or getting patents?

The question is, in which market are you trying to win the race? If you've got enough marketing and sales cash to quickly saturate the market at home, being first is a valid strategy. First mover advantage in larger markets like the US, Europe and Australia is an entirely different proposition. You'd need a huge marketing budget to be ahead of the game in these countries and that's likely to be beyond the reach of even the best-funded Kiwi startup. Consider the US. Incumbents might see your unprotected product do well in California, for example, and quickly copy it using their larger R&D budgets. They might even create a better version of your product and kill yours off in the rest of the US. If you had patent protection, you would at least have some chance of creating value from product development — for example, by licensing one of these competitors to manufacture and market the product in return for royalties.

There may also be certain markets with room for just one quickly established player. Trade Me, for example, set up quickly and grew its Kiwi user base to the extent that it didn’t make sense for EBay to enter New Zealand. If you can find a market here with a similar structure, the 'first to market' strategy might work for you.

If I change someone's product by 10%, will I still infringe its IP? There's no rule in legislation or case law that says changing a particular percentage of a design or product will avoid infringement. After all, what's 10% of the design of a chair?

Each intellectual property right has its own infringement test. The general test for infringement of copyright (which protects literary, artistic and other work, including designs for industrial objects) is whether the infringing work takes a 'substantial part' of the copyright work. Courts are charged with determining whether, for example, a product is sufficiently similar to a copyright drawing to be considered an infringement. They've ruled the qualities of the part of the copyrighted work that is taken is more important than how much is taken. For example, if a product takes the part that gives a design distinctive character, it may amount to copyright infringement even though it's a small section of the work. The other two factors are that the infringing work has the overall appearance of a copy — and some copying between the infringing work and the copyright work has taken place. This makes it important to keep a copy of working drafts of new designs.

Note that copyright, unlike patents, protects the appearance of the product, not the underlying idea. Similar concepts apply to registered designs, for which the infringement test is 'substantial similarity'. Like copyright, a registered design protects only the appearance of a product, not functionality. However, infringement on a registered design doesn't require copying — that is, if I designed my product and, by coincidence, it looks substantially similar to a registered design, it will infringe.

The test for patent infringement is whether a work takes every 'essential integer' of any valid patent claim. At the end of every granted patent there is a list of numbered claims that defines the scope of patent rights. Each has components called integers. If a copycat product avoids taking one of these integers, it will not infringe the claim. If it takes all of these elements, but includes additional ones, it still infringes the claim.

For example, the integers in a claim to a ball point pen may include a cylindrical container, marking fluid, a valve and actuation of the valve by engaging it against a writing surface. It doesn’t matter what the patented and copycat pens actually look like. In the patented pen, the valve might be a ballpoint, while in the infringing pen, the valve is a conical nib; the container might be a long slender container or a short stubby container. The patent claim protects the concept of an ink filled tube with a valve to release ink only when it's used for writing. This shows how hard it is for a patent lawyer to describe what is new about an invention without including elements not strictly required for the invention to work