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Here are the 5 most important lessons all entrepreneurs need to learn about intellectual property

Published on May 22, 2019

In our dealings with dozens of entrepreneurs and small businesses owners on the Property Point performance enhancement programme over the past 10 years, one of the most misunderstood elements is the issue of intellectual property.

Intellectual Property (IP) refers to intangible property that is created as a result of creativity and includes trademarks, copyrights, designs and patents. Friday April 26 marked World Intellectual Property Day which creates awareness about the role that IP rights play in encouraging innovation and creativity.

To celebrate the occasion, we sat down with legal consultant Melody Musoni from Phukubje Pierce Masithela Attorneys to break down for us what every small business needs to know about IP and how to use it to make money.

Musoni says that every business that strives towards success must make sure that it puts in place proper and effective mechanisms to protect its IP rights. Below are her tips for small and medium enterprises in South Africa.

Lesson 1: Register your IP

It is always recommended that it registers its IP. Trademarks, designs, patents and some copyrights may be registered at the SA Companies and Intellectual Property Commission (CIPC).

Where an SME is involved in inventions and innovative solutions, it is a good idea to first engage the services of a patent attorney to determine if any of the innovations can be registered as patents and if there is a commercial benefit in registering it. This step is necessary because once a SME publicly discloses the invention, it forms part of the state of the art and is not patentable in terms of section 25 of the Patents Act 57 of 1978.

Every business is advised to protect its brand name. A trademark is a mark or sign that is capable of distinguishing goods or services of one person to those of another. Building a strong customer base is crucial for the success of a SME and this is usually achieved through proper branding and use of a trademark. Once a trademark is registered, the holder acquires exclusive rights that prevent any other person from using it or any mark confusingly similar to the registered one. This protection applies to any goods and services for which the trade mark is registered (section 34 of the Trademarks Act 194 of 1993).

Lesson 2: Commercialise your IP

For a business to acquire a substantial client base, it needs to commercialise its Intellectual Property. Creating awareness of your IP through advertising or public relations is a powerful way of commercialising and marketing your IP.

Licensing your IP is another effective way to exploit it, particularly if you don't have the resources or experience to develop and market your product or service. Licensing arrangements commonly involve copyright, patents, design and trademarks, but any type of intellectual property can be licensed.

In the case of registered trademarks, patents and designs, a SME may enter into licensing agreements with third parties for the use of the intellectual property rights. Besides licensing, a SME can also enter into franchise agreements with other businesses. The benefit of a franchise agreement is that the SME gets royalties or fees from the use of its IP by the franchisee.

Lesson 3: Appropriate Partner Agreements

When contracting with other service providers, contractors and employees, it is good business practice to make sure that the provisions of the agreements adequately protect your intellectual property rights. Where a SME is involved in a joint venture agreement, it needs to specify who owns the intellectual property rights that may be created because of the joint venture. Where a SME contracts an independent contractor or employee, it also needs to check the provisions in its agreements relating to IP developed during the term of the agreement.

Lesson 4: Take Reputation Seriously

Every business, whether big or small, needs to maintain a good name and reputation with both its customers and suppliers. If a business’ reputation is marred by bad publicity, it could negatively impact on its client base as well as the suppliers or service providers. Any SME should ensure that its trademark and brand name maintains a good reputation and is not involved in any form of negative publicity. A reputation management consultant or public relations agency can assist in mitigating negative publicity and developing a positive reputation for your brand.

Lesson 5: Enforce your IP rights

As a holder of IP rights, a SME must ensure that it enforces its rights by stopping the unauthorised use of its IP. Go after anyone who abuses or exploits the goodwill and reputation of your business. The law has put in place various mechanisms for enforcement of IP rights which includes the court system, the SA Police Services as well as the SA Customs and Excise Authorities. The Counterfeit Goods Act, 37 of 1997, for example, provides avenues for trademark owners to take action against counterfeit goods while the Companies Act, 2008 has also put in place measures to prevent third parties making use of a registered trademark as part of their business names.

If you do not enforce your rights, particularly trademark rights, your brand may suffer “brand genericide” – where a brand name loses its distinctiveness and become commonplace as a descriptive word. A famous example of a trademark that became a generic name is Escalator.

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