Asked to describe a car most people will talk about the make, model and colour. Some might describe the shiny hubcaps or the dirty duco. But few are likely to lift up the hood and describe what they see under there. So, too, most organisations think about their assets in terms of the buildings they own, the products they sell and the furniture in the offices. Some will realise that client lists and employees’ knowledge are assets. But there are many organisations that go no further and forget about the value of their intellectual property (IP) such as brand names, logos, inventions and know-how. Even if these are remembered, the question is, are they protected?

Why is it important? Because if you are going to sell your business, IP may be a very valuable part of the transaction but will be devalued if it is not properly protected. Conversely, if you are buying a business, you want to know that what you are paying for is what you are getting. Whether buying or selling, the parties will need to carry out a due diligence to see what types of IP rights exist and which ones are properly protected.

Relevant IP

Corporate and business names – most organisations put a lot of effort into choosing their corporate or business name. It will be used in marketing and promotional material, on websites, letterheads, business cards etc. You will hope to build a reputation in that name so it is distinctive of the goods or services you offer. If you want to sell your business, the goodwill in the name is a valuable asset. But, corporate and business names of themselves do not give proprietary rights over the name. Without additional protection, if a third party uses the name or something similar, you will need to prove reputation in the name in order to protect it. This can be a costly and time consuming exercise. Further, if you acquire the name without goodwill, you may have no legal reputation on which to rely. So, what’s the answer?

Trade marks – trade mark registration is the best option as once registered, it prevents anyone else using a name that is substantially identical with or deceptively similar to your registered trade mark in relation to the same goods/services or goods/services of the same description for which your mark is registered. There is no need to prove reputation in the mark if someone is infringing your rights. The protection is Australiawide. Registered trade marks can also be used to protect the brand names under which you sell your products or provide your services. For example, the Cadbury group of companies has “Cadbury” registered both as a word and in a stylised version as seen on their chocolate products. It also has registrations for individual lines such as “Freddo” and “Flake”. Thinking outside the square, Cadbury also has the colour purple registered as a trade mark.

If you are considering doing business overseas it is also prudent to clear the name for use in the relevant countries and to register the name as a trade mark in those countries. For many years this meant filing for separate applications in each country. From 1996, it has been possible to obtain protection throughout the European Union by filing one European Community Trade Mark application but this still left many countries. Then, in 2001 Australia joined the Madrid Protocol which allows the filing of one international application in a large number of foreign countries that are also parties to the Protocol. The US joined in 2003 and there are now 85 member countries. 

You may also have a logo that you want to protect and trade mark registration is again the appropriate way to go. Logos can be a very powerful tool in marketing as they become more distinctive of the goods or services they represent. Think of Qantas’ flying kangaroo logo or the “golden arches” for MacDonald’s restaurants. Logos can be extremely powerful branding but even though you paid for the logo, do you own it?

Copyright – if you have a logo that you want to protect or sell down the track, you need to make sure that you own the copyright in the logo. The same applies to other types of material created for you, for example, advertising and promotional material, instruction leaflets and even, specialised software that has been developed just for you. The question to ask is, did you get a third party contractor to create the material or was it created by an employee? If a contractor, then unless the contractor assigned the copyright to you, in writing, they will still own the copyright. 

In the case of copyright, there is no registration process; once a work is created it is protected. What you do need to do, is ensure that you have the appropriate assignment agreement in place with any third parties who are contracted to create material for you. In the case of employees, generally you will own the copyright in anything an employee creates but it is always worthwhile dealing with it in the employment agreement.

Someone who creates a work that is protected by copyright also now has “moral rights” in their work. This is something that is often overlooked by companies. Moral rights include the right of attribution, the right against false attribution and the right not to have the work treated in a derogatory manner. It is not possible for someone to assing or waive their moral rights, however, in the case of an employee it is possible to get a general consent to the doing of acts that would otherwise be an infringement. Assignment and employment agreements should cover a creator’s moral rights.

Confidential information – one of the most important assets you may have is your confidential information, such as, client lists, financial information, know-how and marketing strategies. Whether you are a large or small organisation, you will not want your secrets walking out the door with a disgruntled employee or a contractor who has done some work for you. When you retain new employees, or engage consultants, who have or may have access to confidential information, it is prudent to have them sign a non-disclosure or confidentiality agreement. This does not have to be complicated and can be done by way of a short letter or if you have a written employment agreement, an appropriate clause can be added into it. Remember that once confidential information is disclosed, there is very little that can be done apart from trying to recover damages which can be difficult, messy and expensive.

Licence agreements – these are particularly important in relation to the software that you use to run your business. You might own the software and generate or be able to generate revenue from licences out to third parties. Alternatively, and as is the case with most businesses, you have a licence to use someone else’s software. If you are thinking of selling your business it is important to know whether or not this licence can be transferred to an incoming buyer as this may increase the value of the business. Conversely, if you are buying a business and essential licences cannot be automatically transferred to you, you may want to negotiate a reduction in the price.   

Patents – inventions can be protected, if the right criteria are met, by being registered. But, and it is a big but, you must apply for registration before you take any steps to commercialise the invention or before the invention is “out there”. A registered patent can be a very valuable asset for many organisations so, if you think you have invented something that is novel and inventive, you should seek the appropriate legal advice before it is too late.

What you can do and where we can help

IP audits – every year you take your car to the mechanic, an expert who can look under the hood and make sure your car is in the best possible running order. It’s the same with businesses and their IP. It is prudent to have an IP audit done to identify the IP that you use, what is owned by you and what is owned by someone else but licensed by you and where you need to perfect your ownership. Advice can be given on making sure your IP rights are properly secured so that they can be protected if someone tries to infringe your rights.  

IP due diligence, when you are selling – before you sell your business you need to do an IP due diligence, much like an audit but focusing on the IP that is relevant to the sale. If you have recently done an IP audit, then there should be no hidden surprises under the bonnet and your business should be easily made ready for sale.

IP due diligence, when you are buying – before you buy a business, you need to do an IP due diligence to make sure you are getting what you paid for. We can help you by searching the registers for trade marks, patents and registered designs, ensuring the seller owns what they are selling, making sure copyright essential to the business is owned by the business, checking licence agreements to make sure they can be transferred to you and advising you where there is a mismatch between what you have been told is owned by the seller and what shows up in our investigations. 

So, now you have a better idea of what is under the hood of your business. But just like you get a mechanic to do the annual check, it is advisable that you get IP specialists to check under your hood.