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Protect Your Company’s Intellectual Property—Both at Home and Abroad In 2004, Thomas Dempsey started a company, SylvanSport, in Brevard, North Carolina, to sell a unique recreational camper trailer he invented and patented. SylvanSport marketed the trailer as “more versatile than a Swiss army knife” because it folds into a trailer that can carry boats, bikes, and other gear and, once onsite, convert in minutes into a camper with a self-inflating mattress and tent. By 2011, the company’s annual sales had reached $3 million, 15 percent of which came from outside the United States, particularly South Korea, Japan, and Australia. With international sales growth outpacing domestic sales growth, Dempsey saw a bright future for his company. Then he received an e-mail from a customer that included a link to the Web site of a Chinese company, Wuyi Tiandi Motion Apparatus, that was selling a camper trailer almost identical to the one he had designed. “We were shocked,” says Dempsey. “We thought at first that what we saw was our product, but we realized that [their product] was created from scratch.” Since then, several of Dempsey’s international distributors in Asia have dropped SylvanSport’s camper and are selling the Chinese company’s product. A Japanese distributor mistakenly purchased the Chinese company’s camper, thinking it was buying one of SylvanSport’s products. Thomas Tang, sales manager for Wuyi Tiandi, admits that SylvanSport was the first company “to make this type of trailer, and we followed them to make a similar product.” Although Wuyi Tiandi cannot sell its camper in the United States because of SylvanSport’s patent, “we can still sell our trailer everywhere else [in the world],” says Tang. Dempsey is concerned about the sales his company has lost to its Chinese competitor. “There’s a very real chance that the Chinese company could be the survivor here and we could go out of business,” he says matter-of-factly. Thomas Dempsey took the proper steps to protect his intellectual property by securing a utility patent for his unique camper trailer in the United States. Like many other entrepreneurs in today’s global economy, Dempsey is conducting business internationally, and his U.S. patent offers no protection outside the United States. What lessons can entrepreneurs learn from Dempsey’s experience about protecting their intellectual property? Recognize that intellectual property, the rights that result when a person uses his or her knowledge and creativity to produce something of value, can be a business’s most valuable asset, even for small companies. Often intellectual property is the source of a company’s competitive advantage. Experts estimate that in the United States alone, 30 to 40 percent of all gains in productivity over the course of the twentieth century originated with intellectual property. A recent study reports that 81 out of 313 (26 percent) industries in the United States are “intellectual property-intensive.” These IP-intensive industries are responsible for 27.9 million jobs and account for an impressive 38.2 percent of U.S. GDP. Use the appropriate tool to file for protection of your intellectual property and do so promptly. The processes of filing for a patent, a trademark, and a copyright are different; make sure you know what each tool protects, which one is right for you, and how to get maximum protection from it for your intellectual property. You may be able to apply for more than one type of protection. For instance, an entrepreneur may be able to trademark a company logo and, if it is a form of artistic expression, copyright it as well. Use qualified, experienced intellectual property attorneys to gain the proper protection. The time to involve attorneys in protecting the product of your knowledge and creativity is before you have to bring them in to take action against someone who has stolen your intellectual property. Filing for patents, trademarks, and copyrights can be intimidating if you have never done it before, and doing it incorrectly may mean that you have no protection at all. Attorneys, consultants, examiners, and other professionals specialize in the various types of intellectual property protection. Use their expertise! They can refer you to patent draftspeople (who create the sketches required for a patent application), design engineers, manufacturers, and others. If you do business globally,
register your company’s patents, trademarks, and copyrights in the countries in which you do business or that are a strategic part of your business. Once an entrepreneur has made the proper filings to protect his or her intellectual property in the United States, the next step is to file for protection in the countries in which the company does business and in countries that are strategically important to the business. Only 15 percent of companies that do business internationally realize that U.S. patents and trademarks do not protect their intellectual property outside the borders of the United States. Although enforcing intellectual property laws in some countries can be difficult, the chances that you will be successful rise significantly if you have registered your IP with the proper offices in those nations. Most nations grant patents and trademarks to the first person or business to file. Inventors file about 2.9 million patent applications globally each year, and 2011 marked the first time that businesses and entrepreneurs filed more patents in China than in any other country in the world. Today, 38.1 percent of global patent applications are filed in China, compared to 20.4 percent that are filed in the United States. Businesses also file about 8.5 million applications for trademarks globally each year. Filing to protect intellectual property rights in many individual countries can be expensive and time-consuming. Fortunately, when applying for trademarks, entrepreneurs benefit from important shortcuts: international registration and a community trademark. Entrepreneurs can file an international registration in all 98 nations that participate in the Madrid Protocol with an application in their home nations that they extend to the other 97 nations (although they must pay a registration fee in each country). Entrepreneurs who register a community trademark file a single application and pay a single fee that grants trademark protection in all 27 countries that belong to the European Union. In 2007, the patent offices in the United States, the European Union, and Japan created a common patent application that allows entrepreneurs to streamline the patent process by filing a single application for each country’s patent office. Select your company’s business affiliates, especially suppliers, carefully. Companies in some countries have little concern for others’ intellectual property. Some suppliers in foreign countries see no problem manufacturing goods for a business and then running an extra shift to produce the same goods that they themselves sell. In China, which is famous for its copycat culture, the term shanzai describes companies’ tendency to copy the successful products of other businesses. Entrepreneurs should take extra precautions to ensure that they secure proper protection for their intellectual property before forging relationships with foreign manufacturers, especially those in Asia. Protect your rights vigorously. If you discover that someone is using your intellectual property without permission, pursue your rights vigorously. Recognize that the costs of taking legal action, especially in foreign lands, may outweigh the benefits, at least in the short run. Entrepreneurs must decide whether pursuing costly legal action to protect their intellectual property rights will yield long-term benefits. A “head-in-the-sand” approach never works. After registering their trademarks and filing for patents in foreign countries, entrepreneurs must monitor them carefully and avidly prosecute violators of their intellectual property rights.
Sources: Based on Justin Antonipillai, Michelle K. Lee, Robert Rubinovitz, David Langdon, Fenwick Yu, William Hawk, Alan C. Marco, Anrew A. Toole, and Asrat Tesfayesus, Intellectual Property and the U.S. Economy: 2016 Update, Economics and Statistics Administration and the U.S. Patent and Trademark Office, 2016, p. ii; WIPO Facts and Figures 2016, World Intellectual Property Organization, pp. 11, 21; World Intellectual Property Indicators, World Intellectual Property Organization, 2012, p. 3; Kathy Chu, “Chinese Copycats Challenge U.S. Small Businesses,” USA Today, March 18, 2012, http://usatoday30.usatoday.com/money/smallbusiness/story/2012-03-15/china-copycats-patents/ 53614902/1; Carolyn Surh, “Staying Ahead of Copy Cats,” QSR, March 2012, www.qsrmagazine.com/reports/staying-ahead-copy-cats; “How to Protect Your Trademark Internationally,” Business News Daily, July 13, 2012, www.businessnewsdaily.com/2838-how-to-protect-your-trademark-internationally.html; David Hirschmann, “Intellectual Property Theft: Big Problem, Real Solutions, The ChamberPost, March 2008, www.chamberpost.com/2008/03/intellectual-pr.html; Merrill Matthews Jr. and Tom Giovanetti, “Why Intellectual Property Is Important,” Ideas, Institute for Policy Innovation, July 8, 2002, p. 1; and Nichole L. Torres, “Getting Intellectual,” Entrepreneur, December 2007, p. 110.