There are many traps for young players in the identification, protection and commercialisation of intellectual property. One wrong step may cause you to lose the ability to protect what has otherwise taken a great deal of time, cost and energy to develop.

Recent Court decisions serve as a poignant reminder of the ease with which rights may be lost, by simply displaying or publishing an invention before it has been protected. Those decisions also show that there are some rules relating to the protection of Intellectual property which have general application, regardless of which category of IP they fall into.

Designs

The general principle which applied to applications for registered designs prior to the amendments to the Designs Act in 2003 was that they were required to be new and novel to be capable of registration. If the design was published prior to an application for registration, then it was no longer regarded as novel (as it fell within the prior art base) and was not registrable. There were certain exceptions or extensions under the Act, which allowed designs to be registered in certain circumstances, even after publication.

In Chiropedic Bedding Pty Ltd v Radburg Pty Ltd [2008] FCAFC 142  the beneficial owner of a registered design for mattresses narrowly avoided losing their rights in the design. However, that result may have been quite fortuitous.

Chiropedic (the owner) claimed that Radbury had infringed its registered design of a particular style of mattress. Radbury responded aggressively by asserting that Chiropedic was not entitled to protect the design on a technical basis – namely that the design had been published by Chiropedic prior to the time that it applied for registration. The design had been exhibited at a trade show held at the Melbourne Exhibition Centre, which was organised by the Furnishing Industry of Australia. Seven days after the close of the trade show Chiropedic applied for registration of the design.

The events occurred prior to the amendments to the Designs Act 2003 and it was necessary to apply the provisions of the Former Act. Relevantly, the Act then provided:

"s47(1)The fact that a design, or any article to which a design has been applied, has been exhibited at an official or officially recognised international exhibition, or that a description of a design has been published during the holding of such an exhibition, shall not prejudice or prevent the registration of the design or invalidate the monopoly therein, if the application for the registration of the design is made within six months after the opening of the exhibition."

The circumstances of the exhibition were such that the Full Court considered the Act to apply, (after the Trial Judge found that it did not), and to allow Chiropedic to apply for design registration after publication. Essentially, the Court, (in overturning the decision of the Trial Judge), found that the exhibition was an officially recognised international exhibition, within the meaning of s47.

The test under the 2003 Act is whether the design is new and distinctive (c.f. novel) when compared with the prior art, which exists both in Australia and the rest of the world, before the date of the application for registration. Whilst there are still some exceptions which allowed designs to be registered, after publication (see section 17 Designs Act 2003 and reg 2.01 Designs Regulations 2004) it may be a dangerous strategy to seek to rely on those provisions to obtain protection.

Patents

Of course, patent applications can suffer a similar fate. Inventions will not be regarded as novel, inventive or innovative (as required by s18 of the Patents Act 1990) where they have been made known through prior publication or prior use. In April 2002 a grace period of 12 months was introduced in the Patents Act to allow inventors to apply for patents where they have made disclosure, (in some circumstances), within the previous 12 months. However, problems may occur as a result of the type of patent application which is made, where timing is an issue.

There are 2 types of patents which may be applied for, known as standard patents or innovation patents. The innovation patent was introduced in 2001 and is designed to provide a relatively quick and inexpensive method of protecting inventions that do not meet the inventive threshold required for standard patents. Standard patents require a higher threshold and take longer to register due to a more detailed examination process, but provide a longer period of protection (20 years compared with 8 years for innovation patents).

The recent case of Mount Adventure Equipment Pty Ltd v Phoenix Leisure Group Pty Ltd [2008] FCA 1476  highlights some of the limitations with grace periods. In that case the item was offered for sale to the public in October 2004. Some months later in May 2005, (but within the grace period), Mount Adventure applied for a standard patent. That application was proceeding through the normal channels when Mount Adventure formed the view that its rights were being infringed. Accordingly, in November 2006, it decided to file an innovation patent, to obtain the right to commence infringement proceedings more quickly.

The difficulty was that the disclosure which had been made in October 2004 was within the grace period for the stand patent application, but outside the grace period (more than 12 months prior) for the innovation patent application. That meant that the invention could not be regarded as novel or innovative for the purposes of innovation patent application, as it was already within the prior art base and did not fall within the exception allowed by the grace period.

While the case highlights some of the difficulties in relation to patent applications (and patent litigation), it reinforces the risks which may be involved in not keeping quiet before protecting your ideas.

Copyright

One of the ways in which copyright may be lost is where the work is capable of design registration and it is industrially applied (ie more than 50 copies are made) without first obtaining that registration, unless it falls within one of a few limited exceptions to the rule. As discussed above, ordinarily, designers are required to obtain design registration for their product, before it is published to the world, otherwise they lose the monopoly rights to which they would otherwise have been entitled.

In the event that a designer elects not to obtain design registration, then they may still be able to protect their product by relying on copyright. However, any protection which is afforded to the designer, pursuant to the Copyright Act, may be lost to them if the product is industrially applied (that is more than 50 copies of the item are made), and the design is not registered or is not capable of registration under the Designs Act (section 77 Copyright Act). The Act provides an exception to the rule where the product is an artistic work, as that term is defined in the Act. (section 77(1) Act). Most commonly, products which are artistic works (of which there are a limited number of categories) must be considered to be works of artistic craftsmanship in order to fall within the definition.

A recent example is Burge v Swarbrick [2007] HAC 17 , which involved racing yachts that had been produced for sale where design registration had not been sought. In short, the designer was unable to claim copyright protection in the yachts as he had not applied for design registration and the work did not come within one of the exceptions in the Copyright Act.

The case involved a determination of whether the "plug" or scale model of a sports boat which Mr Swarbrick had designed, (with the intention of creating a sports craft, capable of being operated by only 2 or 3 people), was a work of artistic craftsmanship and therefore entitled to protection under the Copyright Act, where the design had not been registered under the Designs Act. The design required that the craft be both fast and easily balanced whilst it was also the designer’s intention to create a craft which was visually attractive or having a "high level of aesthetic appeal" ((2004) 138 FCR 353 at 366).

Mr Swarbrick was successful in obtaining injunctive relief to restrain the use of the design, both in the Federal Court and on appeal to the Full Court. However, the decision was overturned by the High Court on appeal. Central to the High Court's decision was a consideration of the extent to which the design was of "real artistic effort", unconstrained by functional considerations (para 51). That is, the work must contain "a real or substantial artistic element" (para 52). The Court found (with the assistance of expert evidence) that speed was the overriding consideration in the design of sports boats or yachts in the class of those produced by Mr Swarbrick and that all other factors, including considerations of appearance or aesthetics, were of secondary importance. That amounts to a departure from earlier decisions. In the first case on point in Australia, Coogi Australia Pty Ltd v Hysport International Pty Ltd (1998) 86 FCR 154 , the Court referred to Lord Simon's judgement in Hensher Ltd v Restawile Upholstery (Lancs) Ltd [1976] AC 64 at 93B-C , where he said "The presence of non-functional features cannot be the test since .…. the anthesis between function and beauty is a false one."

The position may now be that any item which is industrially applied will lose protection in the event that the design specifications are largely driven by a functional purpose and design registration is not obtained. The Court certainly appears to have taken the view that if protection (via design registration) is available, then it should be obtained and that section 77 of the Copyright Act will not come to the rescue of those designers who either neglect to register their design or elect not to do so. It would be a bold move to ignore the warning of the Court and not to obtain registration if the design is worth protecting.

Summary

Of course other commercialisation strategies are available. It may well be that you decide not to take any steps to protect your intellectual property and instead go to market first to get the jump on any competitors. Once the product is in the market, others will not be able to protect it, in the same way that you may lose that ability. However, the cases mentioned above should sound a loud warning bell that any decision to take the product directly to market should not be made lightly and ought to be considered in the context of a wholistic IP strategy. After all, invention is 10% inspiration and 90% perspiration, but should be 100% protection.

The moral of the story is that care should be taken to identify any intellectual property rights which you might have and to develop a commercialisation strategy, irrespective of whether the product is developed by an existing business or a start-up organisation. Businesses should act to ensure that they do not lose the rights in any new products and should also regularly take stock to ensure that they are maximising the benefits which may be derived from the fruits of their labours.