NEW DELTA IN­SUR­ANCE WHITEPA­PER TAKE­AWAYS: IN­SURE YOUR IDEAS TO STOP OTH­ERS FROM SU­ING YOU FOR THEM

Haven’t in­sured your in­no­va­tions and/or busi­ness ideas yet? You prob­a­bly should – es­pe­cially if the find­ings of Delta In­sur­ance’s new com­pre­hen­sive whitepa­per on in­tel­lec­tual prop­erty in New Zealand are any­thing to go by. Here are some key take­aways from

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It’s not easy to in­no­vate, as any­one can at­test. But what’s not as well-known: not only is it dif­fi­cult to come up with an idea and make money off it, but it’s even harder to pro­tect that idea from oth­ers who might copy it and make even more money off it with­out com­ing up with it them­selves.

That’s one of the key take­aways from a new whitepa­per from Delta In­sur­ance. Re­leased in early Novem­ber, the whitepa­per, ti­tled “Pro­tect­ing Your Com­pet­i­tive Ad­van­tage,” deals with what’s known as in­tel­lec­tual prop­erty (IP) risk man­age­ment. Ac­cord­ing to the whitepa­per, IP counts as an “in­tan­gi­ble as­set” of a com­pany – some­thing which could be pro­pri­etary knowl­edge, cus­tomer data, re­la­tion­ships with other busi­nesses, de­signs, in­no­va­tion, and more. Cit­ing statis­tics from Ocean Tomo that state the value of in­tan­gi­ble as­sets to the av­er­age busi­ness has in­creased from 17 per­cent of to­tal as­sets in 1975 to al­most 87 per­cent in 2015, it goes on to state that these in­tan­gi­ble as­sets are also im­por­tant to busi­nesses and or­gan­i­sa­tions in Aotearoa – es­pe­cially with our famed No. 8 wire men­tal­ity and cul­ture of in­no­va­tion.

“I think the big is­sue here is that start-ups are spend­ing a huge among of money col­lec­tively in NZ (over $1.6 bil­lion R&D spend in New Zealand last re­ported) and spend­ing a mas­sive amount of time de­vel­op­ing in­no­va­tive new ideas and con­cepts – all of which are world lead­ing and in­cred­i­bly ex­cit­ing,” says Craig Kirk, co-founder and gen­eral man­ager of Delta, of some of the whitepa­per’s most im­por­tant find­ings.

“How­ever, there is con­cern that they are not think­ing strate­gi­cally about man­ag­ing and pro­tect­ing these in­tan­gi­ble as­sets. For tech start-ups, their value is in their in­tan­gi­ble as­sets and IP. Pe­riod. The ques­tion, there­fore, is how they se­cure their IP smarts so that they can ben­e­fit from the com­mer­cial­i­sa­tion of these as­sets – be­fore some­one copies them or beats them to it.”

So how, ex­actly, can busi­nesses of all sizes – from start-ups to large cor­po­ra­tions – se­cure their IP? Kirk says it can be as sim­ple as buy­ing in­sur­ance. But, he adds, even that might not nec­es­sar­ily be enough. “Those that are more proac­tive will spend con­sid­er­able dol­lars reg­is­ter­ing their IP rights, but even that does not mean you are able to be fully ‘se­cure,’ as you still need to have the funds to be able to en­force those rights (or in some cases

de­fence and al­le­ga­tions of in­fringe­ment of rights),” he says. “This is where IP le­gal ex­penses in­sur­ance can add a lot of value.”

But how do they add value? Kirk ex­plains. “In sim­ple terms, the value of IP le­gal ex­penses in­sur­ance cover is that it gives you the funds to be able to pay for le­gal ex­perts to ei­ther be able to de­fend you in the case of some­one al­leg­ing that you’ve in­fringed their IP, or to be able to en­force your own IP rights if an­other party has breached these rights.”

He says more. “The pol­icy also pro­vides af­fir­ma­tive cover in re­la­tion to li­censee dis­putes, and in ad­di­tion pro­vides ac­cess to a pub­lic re­la­tions con­sul­tant to as­sist clients with any rep­u­ta­tional is­sues that may arise as a re­sult of IP lit­i­ga­tion.”

Trans­la­tion: it’s an ex­tra layer of pro­tec­tion to make sure some­one steal your ideas – or claim that you stole their idea.

All this is es­pe­cially im­por­tant be­cause, as the whitepa­per states, there is “in­creased ac­tiv­ity” in Aotearoa’s IP land­scape. And, the whitepa­per adds, not hav­ing IP le­gal ex­penses in­sur­ance can have dev­as­tat­ing con­se­quences.

As an ex­am­ple, it cites a 2017 case in which a café in Welling­ton re­ceived a no­tice from Coca-Cola over us­age of the word “in­no­cent” in its name – as Coca-Cola owns the trade­mark. To avoid in­fringe­ment, the café had to change its name and re­brand.

The whitepa­per also uses as an ex­am­ple a 2008 case in which the New Zealand-based elec­tron­ics man­u­fac­turer Phitek was hit with a patent in­fringe­ment by US-based com­peti­tor Bose over Phitek’s noise can­cel­la­tion tech­nol­ogy in its head­phones. As part of a set­tle­ment agree­ment, Phitek was forced to make changes in its head­phones to avoid in­fring­ing on patents held by Bose.

What other trends are we see­ing with IP in the Land of the Long White Cloud? Kirk of­fers some in­sights. “Un­for­tu­nately this data is not col­lected cen­trally, so it’s dif­fi­cult to quote any statis­tics,” he says of some of the chal­lenges.

“In ad­di­tion, a lot of le­gal dis­putes are re­solved out of court and swept un­der the car­pet, be­cause the par­ties con­cerned are wor­ried about the rep­u­ta­tional is­sues with a dis­pute go­ing pub­lic.”

Yet he does have some in­sights. “How­ever, anec­do­tally, from talk­ing to IP prac­ti­tion­ers the trend is that IP dis­putes are on the in­crease. This is partly driven by a gen­eral in­crease in liti­gious­ness, but also more ac­tive en­force­ment of IP rights by large, global play­ers who are not afraid to wield their power.”

And that’s not all. “There are also ma­jor and on­go­ing chal­lenges as­so­ci­ated with the US and China in par­tic­u­lar. The mes­sage is that if you are tak­ing your of­fer­ing off­shore, you need to be crys­tal clear that you have all of your ducks in a row.”

With New Zealand R&D ex­pen­di­ture up about 29 per­cent be­tween 2014 and 2016 – reach­ing more than $1.6 bil­lion, ac­cord­ing to Delta – that seems like ap­pro­pri­ately sage ad­vice.

Kirk’s ad­vice is also backed up by Delta’s own find­ings. As the 24page whitepa­per con­cludes: “IP risk man­age­ment, there­fore, needs to be a strate­gic is­sue for New Zealand busi­ness. Over­look­ing this crit­i­cal fac­tor ca put the com­pany’s Board and man­age­ment un­der sig­nif­i­cant pres­sure and po­ten­tially place the very sur­vival of a busi­ness in jeop­ardy.”

But it doesn’t end on a downer. “Al­ter­na­tively, ef­fec­tive man­age­ment of IP en­sures that a busi­ness can un­lock the max­i­mum value from its R&D in­vest­ment.”

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