The Henry Smiling Vacuum Cleaner (shown left) is a familiar sight to many consumers. He may even make the chore of vacuuming seem like a happier task.

However there were no smiles on the faces of Numatic International Limited (“Numatic”) who make the Henry when they came across Qualtex UK (“Qualtex”) marketing a vacuum cleaner (shown above right) at the Cleaning Show in the NEC in Birmingham last year. Qualtex’s product was essentially a mirror image of the Henry Smiling Vacuum Cleaner, but without Henry’s smile and name, and in a different colour.

Over the years, Numatic has built up substantial goodwill and reputation in the combination of distinctive features which make up the Henry Smiling Vacuum Cleaner, and it was for this reason that when Numatic took Qualtex to court alleging passing off, they won their legal battle.

The court held that consumers could be confused into thinking the prototype model designed by Qualtex had an association with the Henry Smiling Vacuum Cleaner if it were to go on the market. The Judge commented that “whilst a different colour had been chosen for the base, the bowler-hatted lid was in shiny black, just like Henry…”.

Joanna Potbury from DMH Stallard says “Successful products like this often attract copycats and there remains a common misconception that making a number of changes will let you off the hook from a legal perspective.  This case shows that if you think that someone is trying to ride on the back of your success, the law is there to help you.”

An announcement of 3 Fashion Fringe at Covent Garden Finalists was made recently at The Club at The Ivy in London by John Galliano, Chairman of the Fashion Fringe Covent Garden platform.

In the lead up to the finals in September at London Fashion Week, all Finalists will receive mentoring in various different skills by business specialists. Last week the trio of finalists, Alice Palmer, Jade Kang and Corrie Nielsen were briefed on intellectual property issues in a one to one mentoring by Anti Copying ACID’s CEO Dids Macdonald.

During the session Dids identified specific areas and concerns of the individual designers and gave an overview of practical ways in which all designers can better protect their creativity and innovative ideas.     All Finalists were given a FREE year’s membership of ACID.  Below are a few tips from the mentoring sessions.

BE VIGILANT – Not just about others copying your designs but actual prototypes and samples can be stolen too. So ensure that there is CCTV and adequate security for your design studio.

KEEP A DESIGN AUDIT TRAIL – Sign and date all your work. Register your designs in the UK or EU if at all possible: www.ipo.gov.uk or www.oami.europa.eu
ACID members can use the free ACID Design Data Bank to deposit their design at key stages from the seed of an idea to finished product. This provides valuable third party evidence to support prior art. To join visit: www.acid.uk.com

IF YOU DON’T WANT TO BE COPIED, SAY SO! Make a strong statement on your website, promotional material, product labeling such as, “All intellectual property rights are and will remain the property of (insert your name). Any infringements will be taken seriously.”

AGREEMENTS – NEVER send/leave prototypes or designs without a signed agreement
SAY NO TO PHOTOS – Unauthorised photography is the fastest and easiest way for other’s to steal your ideas.

This month, Andrew Lee of McDaniel & Co looks at the effectiveness of design protection and taking legal action.

Q. What are the realities of protecting IP within the UK, the euro zone and worldwide? It seems protection and enforcement comes down to cost and some manufacturers feel they are unable to afford effective legal action?

A. If a design or manufacturing company is creating intellectual property through their innovation, an integral part of any IP protection strategy is allocating sufficient budget to register new designs, if at all possible, and to allow for a budget to enforce those rights if there is infringement. With easy access to the UK and European Community-wide protection for designs and trade marks, the cost is much lower than it used to be. If a company is registering a series of designs the cost reduces considerably so for 11+ new designs it is as little as 60 € to obtain a registered Community design which lasts for 25 years (renewable every five years) covering 27 EU member states. Many companies pay a small additional fee and defer publication (on the OHIM website www.oami.europa.eu) so that competitors cannot see their new designs before they are launched and marketed.

The advantage of having a registered UK or EU design is that taking legal action is easier and more cost effective because you have a piece of paper, a numbered certificate which says you own the design and it cannot be used by third parties without authorisation.

To ensure brand protection, there is an additional registration system for trade marks which can make registration more cost effective but there are no pan-national design registration systems outside the EU so national registration is necessary. Therefore, it makes sound sense to do a swot analysis of the countries in which your products will be marketed and allocate appropriate budget to ensure you have adequate IP protection.

Q. How can I ensure design protection in the USA?

A. The USA does not have a design registration system as such and it is necessary to apply for a ‘design patent’ in order to protect 3-dimensional wholly or partly functional designs. According to the United States Patent and Trade Mark office (www.uspto.gov) “Design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture.” Fees are expensive and it is advisable to instruct a local agent to draft and file the application.

Q. What are the pros and cons of registered and unregistered design right in terms of effectiveness?

A. Registered designs are the strongest form of protection because they give monopoly rights and can last for 25 years. UK Unregistered rights last for 10 years from the end of the year of first marketing but remember third parties may copy the design after 5 years provided that they pay you a reasonable royalty. In Europe, unregistered Community design right only lasts for 3 years from first being shown in public. If a designer/manufacturer who relies on unregistered Community design decides to register the design they must do so within a year the design is first shown in public. Often, designers who are constantly innovating will, if there are budget restrictions, test the market to see if a product is successful and then, if so, allocate registration budget.

Those relying on unregistered UK or EU design right (if they are ACID members) can send their designs into the FREE and unlimited use of the ACID Design Data Bank to give dated evidence of the origination of designs, pitches and tenders. www.acid.uk.com

Q.  Look alike products within my industry sector are prevalent, what is the best course of action when discovering an alleged infringement?

A. ACID’s advice is never to sue on principle. Establish what your objectives are in taking legal action and take specialist advice on the merits of your particular set of circumstances. Ask yourself, “If I take legal action against copyists, what do I want to achieve?” Consideration should be given to obtaining an undertaking that further alleged copy products will not be sold. Try to obtain damages to reflect quantifiable loss if any can be identified and obtain an admission of liability and your costs paid. Taking legal action does not necessarily mean going all the way to court. Often objectives can be achieved by a strong letter before action (LBA) in a cost and time effective way. Of ACIDs 400 settlements, less than 5 have reached a final Court hearing. Often, by taking legal action and obtaining a settlement this can be communicated in the trade press to reinforce your IP strategy and delivers a strong message that if anyone does copy you, you will sue them.

Q.  What is a letter before action (LBA) or a cease and desist letter?

A. The purpose of an LBA or “cease & desist” is to warn of possible Court action and offering an opportunity to provide evidence that they have not copied you or admit liability without expensive Court action. The LBA will normally give a time limit for a reply and will reflect established facts about the complaint to achieve, hopefully, an early settlement. Court Rules also require an LBA to be sent before any proceedings are commenced, except in very urgent cases. An effective LBA will take time to prepare – it is not just an ordinary letter written on solicitor headed paper. It encompasses every possible aspect to achieve your objectives in taking action against copyists.

An IP lawyer will need to be satisfied, beyond ANY doubt that you actually own your rights, just as you would when buying a house – think about what it costs to establish title when you are buying a property! You are relying on your solicitor’s experience to spot all the potential pitfalls to act in your best interests – they are relying on being provided with all the ammunition possible to fight for your rights.

Q. How effective is an LBA?

A. An effective LBA can often result in a speedy, cost effective settlement with many (if not all) objectives being met. Before taking action you should also consider the legal purchasing power of the opponent – there can be difficulties when two parties with unequal market power and resources resort to Court action.

Assessing the value of intellectual property, intangible assets and goodwill

“Intellectual capital is recognised as the most important asset of many of the world’s largest and most powerful companies to the smallest SME”, says Kelvin King, a founding partner of Valuation Consulting now part of BNP Paribas; “It is the foundation for the market dominance and continuing profitability of all companies.  It is often the key objective in mergers and acquisitions and knowledgeable companies are increasingly using licensing routes to transfer these assets to low tax jurisdictions.  It is often the most infringed asset class.  Accounting Standards are not helpful in representing the worth of intellectual property (“IP”) in company accounts.”  The questions to be answered should be:

• What is the IP used in the business
• What is the value (and hence level of risk)
• Who owns it (could I sue or could someone sue me)
• How may it be better exploited (eg licensing in or out, of technology)
• At what level do I need to insure the IPR risk

ACID members will particularly understand the problems associated with quantifying the valuation of loss of business opportunity and/or valuation of damage, because of infringement.

For the valuer this is not usually a problem when these rights and liabilities take an accepted form, such as design right, trademarks, patents or copyright, which are well enough known.  This is not the case with intangibles such as know how and proprietary technology, which can include the talents, skill and knowledge of the workforce, training systems and methods, designs and technical processes, customer lists, distribution networks etc.  Overall risk affects valuation analysis, corporate valuation must reflect risk and most importantly risk assessment should reflect IP value.  Understanding the value of IP is vital in most commercial exploitation strategy and in infringement actions.

One of the key factors affecting a company’s success or failure is the degree to which it effectively exploits intellectual capital, manages IP protection, and values risk.  Management obviously need to know the value of the IP and those risks for the same reason that they need to know the underlying value of their tangible assets; because business managers need to know, or should know, the value of all assets and liabilities under their stewardship and control, to make sure that values are maintained.  Markets (restricted or otherwise), institutions and shareholders need to be educated.  Exploitation can take many forms, ranging from outright sale of an asset, litigation or a joint venture of licensing agreement.  Inevitably exploitation increases the risk assessment.

Valuation is an art more than a science and is an interdisciplinary study drawing upon law, economics, finance, accounting, and investment.  It is rash to attempt any valuation adopting so called industry/sector norms in ignorance of the fundamental theoretical framework of valuation.

Valuation procedure is, essentially, a bringing together of the economic concept of value and the legal concept of property.  The presence of an asset is a function of its ability to generate a return and the discount rate applied to that return.  The cardinal rule of commercial valuation is; the value of something cannot be stated in the abstract; all that can be stated is the value of a thing in a particular place, at a particular time, in particular circumstances.  I adhere to this and the questions ‘to whom?’ and ‘for what purpose?’ must always be asked before a valuation can be carried out.  This rule is particularly significant as far as the valuation of intellectual property rights is concerned.  More often than not, there will only be one or two interested parties, and the value to each of them will depend upon their circumstances.  Failure to take these circumstances and those of the owner, into account will result in a meaningless valuation.

There are four main value concepts, namely, owner value, market value, tax value and fair value.  Owner value often determines the price in negotiated deals and is often led by a proprietor’s view of value if he were deprived of the property.  The basis of market value is the assumption that if comparable property has fetched a certain price, then the subject property will realise a price something near to it. The fair value concept, in its essence, is the desire to be equitable to both parties.  It recognises that the transaction is not in the open market and that vendor and purchaser have been brought together in a legally binding manner. Tax valuation has been the subject of case law worldwide since the turn of the century and is an esoteric practice. There are quasi-concepts of value which impinge upon each of these main areas, namely, investment value, liquidation value, and going concern value.

Acceptable methods of the valuation of identifiable intangible assets and intellectual property fall into three broad categories.  They are either market based, cost based, or based on estimates of future economic benefits.  In an ideal situation, an independent expert will always prefer to determine a market value by reference to comparable market transactions.  This is difficult enough when valuing assets such as bricks and mortar because it is never possible to find a transaction that is exactly comparable.  In valuing an item of intellectual property, the search for a comparable market transaction becomes almost futile.  This is not only due to lack of compatibility, but also because intellectual property is generally not developed to be sold and many sales are usually only a small part of a larger transaction and details are kept extremely confidential.  There are other impediments that limit the usefulness of this method, namely, special purchasers, different negotiating skills, and the distorting effects of the peaks and troughs of economic cycles.  In a nutshell, this summarises my objection to such statements as ‘this is rule of thumb in the sector’.

Cost based methodologies, eg the cost to create or the cost to replace, assume that there is some relationship between cost and value and the approach has very little to commend itself other than ease of use.  The method ignores changes in the time value of money and ignores maintenance.

The method of valuation flowing from an estimate of future economic benefits can be broken down to four limbs; capitalisation of historic profits, gross profit differential methods, excess profits methods, the relief from royalty method and discounted cash flow analysis.

While the capitalisation process recognises some of the factors which should be considered, it has major shortcomings, mostly associated with historic earning capability.  The gross profit differential methods are often associated with trade mark and brand valuation.  The excess profits method is associated with earnings capability in order to induce investment and, while theoretically relying upon future economic benefits from the use of the asset, the method has difficulty in adjusting to alternative uses of the asset.  Relief from royalty considers what the purchaser could afford, or would be willing to pay, for the licence.  The royalty stream is then capitalised reflecting the risk and return relationship of investing in the asset.

Discounted cash flow analysis is probably the most comprehensive of appraisal techniques.  Potential profits and cash flows need to be assessed carefully and then restated to present value through use of a discount rate, or rates.  With the asset you are considering, I will need to consider the operating environment of the asset to determine the potential for market revenue growth.  The projection of market revenues will be a critical step in the valuation.  The potential will need to be assessed by reference to the enduring nature of the asset, and its marketability, and this must subsume consideration of expenses together with an estimate of residual value or terminal value, if any.  This method recognises market conditions, likely performance and potential, and the time value of money.  It is illustrative, demonstrating the cash flow potential, ‘or not’, of the property and is highly regarded and widely accepted in the financial community.  The discount rate to be applied to the cashflows can be derived from a number of different models, including common sense, build-up method, dividend growth models and the Capital Asset Pricing Model utilising a weighted average cost of capital.  This appraisal technique will probably the preferred option.

These processes lead one nowhere unless due diligence and the valuation process quantifies remaining useful life and decay rates.  This will quantify the shortest of such as the following lives: physical, functional, technological, economic and legal.

Kelvin King is a Senior Director of Valuation Consulting (now a BNP Paribas company) and can be contacted on 0207 338 4830 or email: Kelvin@valconsulting.co.uk or view the website: www. valuation-consulting.co.uk

How to fully protect, exploit and commercialise your IP

In the first of a series of intellectual property seminars led by ACID Accredited intellectual property lawyer Jo Potbury of DMH Stallard at the newly formed British Institute of Interior Design in Chelsea Harbour, delegates heard about the importance of protecting design drawings, registering new designs and the creation of an intellectual property strategy.

Jo Potbury said, “I cannot stress enough the importance of protecting your Intellectual Property rights. Intellectual Property is a fundamental part of your business and unfortunately, the more successful your business, the more likely you are to come under threat.” Jo referred to Daniel Defoe’s well known quote to underpin her message, “To print another Man’s copy is much worse than robbing him on the Highway; for the Thief takes only what he finds about him, but the Pirate printer takes away his inheritance [which] both is and ought to be due, not to the Author only, but of his Family and Children.”

Using the recent Morgan versus PTT case to demonstrate some of the problems faced by those who respond to tender opportunities and find that their submission is used by third parties without authorisation, Jo set out ways in which belt and braces can be placed around submissions and responses to tender. One of the ways is to send copies of tender/pitch responses to the ACID design data bank and ensure that the recipient is aware that a copy has been sent to ACID. In this way, it ensures that the subject of IP ownership is raised and asserted.

One of the objectives of the new BIID partnership is to feature IP as an integral part of BIID’s CDP programme and ACID is looking forward to working closely with BIID to achieve this objective and to offer advice on IP issues which affect the interior design sector. One of the main benefits of this partnership is a 20% discount off ACID membership to BIID members.

To celebrate the beginning of the ACID/BIID partnership delegates will receive a complimentary copy of the ACID Safe Pitch Kit. In it they will find tips, guidance and advice on various aspects of IP and some standard generic re-usable agreements which can be added to standard terms and conditions of business. These comprise a Confidentiality Agreement, Intellectual Property Agreement and Licence/Royalty Agreement. The intention is that bespoke clauses can be added to personalise them to suit particular requirements.

Further advice can be accessed through Jo Potbury of DMH Stallard on 01293 605596 or email her on joanna.potbury@dmhstallard.com
There would be a charge for any additional work and ACID members receive a discounted hourly rate.

The winners of the Restaurant & Bar Design Awards were announced in central London this week. Only in its second year and with nearly 400 entries from over 38 countries worldwide, the evening was a great success.

Judged by a highly-influential panel of top design, hospitality and lifestyle editors both the designers and hospitality operators were recognised for design excellence across a wide variety of categories. Overall winners for Best Restaurant were Galvin La Chapelle in London designed by designLSM Best Bar was awarded to The Tote in India designed by Serie Architects.

Cinimod Studio were commissioned to create a system unique to the event. RFID (Radio Frequency Identification) technology was used to identify key visitors on the two ‘networking pods’ during the evening’s proceedings. The Awards were the first event that combined this technology to create a truly ‘connected’ environment.

The design of the Awards event reflected the entrants’ creativity and offered a unique space where guests were able to network effectively in innovative ways.

Guests were served a selection of Welsh inspired canapés created by Angela Gray, Bethan Gray and students of the LCHC at Hackney Community College. A ‘culinary design workshop’ held at Fonmon Castle in South Wales gave the students the knowledge and inspiration to create a series of canapés using some of Wales’ finest ingredients.

Drake & Morgan created and served some exquisite ‘skinny’ cocktails, plus guests enjoyed Chateau du Seuil wine, Sputnik vodka and Tomos Watkin beer from The Hurns Brewery. Attended by over 350 of the UK and worlds top hospitality designers, architects and operators, this was one of the most exciting events in the design calendar.

View the website: www.restaurantandbardesignawards.com

Mr Jose Manuel Barroso
President of the EU Commission
Karel De Gucht
EU Commissioner to External Trade

June 2010

Dear Sirs

Established in 1998, the Alliance Against IP Theft is a UK-based coalition of 20 associations and enforcement organisations with an interest in ensuring intellectual property rights receive the protection they need and deserve.  Our members include representatives of the audiovisual, music, video games and business software, and sports industries, branded manufactured goods, publishers, retailers and designers.

The Alliance is concerned with ensuring intellectual property rights are valued in the UK and that a robust, efficient legislative and regulatory regime exists, which enables these rights to be properly protected.   We are active members of the UK IP Crime Group and the EU Observatory on Counterfeiting and Piracy.

I am writing in support of recent correspondence you will have received from Dids Macdonald, Chief Executive of ACID (Anti-Copying in Design) and a member of the Alliance.

Like ACID, we are disappointed that the current draft of the Anti-Counterfeiting Trade Agreement (ACTA) allows for a partial exclusion of industrial design rights.  Given that design can often not rely on other protected right such as trade marks or copyright, this exclusion weakens and undermines the role that industrial design rights play in today’s economy.   We are also concerned, given the importance of this document, at the impact it will have on the wider debate on the need for more effective enforcement of all intellectual property rights.

We urge the Commission, in its further negotiations on ACTA, to actively lobby for this exclusion to be removed and the same protection given to industrial design rights as afforded to trade marks and copyright.

Yours sincerely

Susie Winter
Director General

Cc: Dids Macdonald, CEO ACID
Nick Kounoupias, Chief Legal Counsel, ACID

ACID Member Hsiao-Chi Tsai recently wowed Ascot Races with her innovative reversible hat.  Specially designed to be worn in more than one way, Tsai ensured that she had sent all details of her design to the ACID Design Data Bank before leaving for Ascot, where it would receive maximum exposure.

By ensuring that her design was recorded on the ACID Design Data Bank Hsiao-Chi had obtained third party independent proof of the date of the design’s existence, thereby giving her dated evidence which potentially could pre-date a would be copyist.  If you are relying on unregistered rights such as UK Unregistered design rights and EU Community design rights it is important that you have a paper trail of evidence showing the progression of  your design.  Copyists can rarely provide this type of independent information as they simply reverse engineer from the finished product so that they can replicate it.  The ACID DDB will accept design progression as well as the final example and is free and unlimited to all ACID Members.

Hsaio-Chi commented,  ” Making a dynamic hat is one of the latest developments of using my unique three dimensional textile technique which I first developed in 2005 at the Royal College of Art.
This sculptural hat was specially created for a lady to wear to Royal Ascot this year.  Submitting images of my latest creation to the ACID Design Data Bank, before the opportunity to expose it for the first time in public, really gives me confidence to showcase my work in any big event, like Royal Ascot! ”

Hsiao-Chi Tsai already has an impressive portfolio of work for such people as Harvey Nichols, The Royal Botanic Kew Gardens and London’s South Bank Centre which can be viewed on the website she shares with sculptor and collaborator Kimiya Yoshikawa http://www.tsai-yoshikawa.com

ACID Member Nomad Wheelchairs, of Ciliau Aeron, near Lampeter, had the honour of meeting Sir Stirling Moss at an exhibition aimed at the disabled market – the Mobility Roadshow, at Peterborough on 1^st July.  As a wheelchair design and manufacture company, Nomad was selected out of some 100 exhibitors to meet Sir Stirling, due to Nomad Director Mark Owen’s activities in motor racing, as well as the innovative new products they launched at the show.

“Sir Stirling was on fine form”, says Jon Owen, Mark’s brother and co-Director of Nomad, “you can still see that fire in the eyes!”

Mark Owen and Sir Stirling swapped race track stories, as well as some technical thoughts on the one of Nomad’s new products, a one-arm drive for a wheelchair, which makes use of motor racing technologies.

Mark adds “Getting positive technical feedback from a legend like Sir Stirling was amazing. He immediately saw the benefits of applying the technology we have and thought we should do very well with it.”

More information is available from Jon Owen:

Tel  (01545 580 257 / 07852 598 528)  jon@nomadwheelchairs.com