Posted by: the3rdi | February 16, 2010

HOW CAN A SMALL FIRM PROTECT ITS INTELLECTUAL PROPERTY?

Planit Products, based in Malvern, Worcestershire, invents and manufactures a range of innovative products which can be found in Tesco, Morrisons, Sainsbury’s and Aldi – as well as on the internet.

But protecting its Intellectual Property (IP) rights in the Far East is proving troublesome. Planit’s H2go bag, which it had manufactured in China, is selling steadily – it enables users to carry 80 litres of water in a wheelbarrow.

Partners Guy Unwin and Caroline Kavanagh looked at the cost of manufacturing the H2go in Europe but decided on China. “We knew it was a risk but it was so much cheaper to make the bag there where the tooling costs tens rather than hundreds of thousands of pounds,” said Guy.

“We have sold about half the bags we ordered but our Chinese suppliers are now saying that next time we must place an order five times bigger than our original one.

“We are still talking to them but they say they will not make any more for us without the order they are demanding. They also say they have had requests for it from other sources and may start selling it elsewhere.”

He added: “We hear that they will be attending a trade exhibition in the US later this year and are hoping that if they do any business there with our H2go bag we can nail down a licensing agreement with them.

“The trouble is that you can pay huge legal fees to fight this kind of thing with no guarantee of success. We took legal advice when we first went to China for manufacturing and although we had an exclusive agreement drawn up with our Chinese suppliers, they refused to sign it.

“As a small company we develop products all the time but unless you have a £200,000 marketing budget it’s hard to see how you can protect your products from IP infringement like this.”

It had really opened their eyes to the issue of protecting IP, he said, and Planit is now planning to go back to
Clifton Asset Management (CAM) for advice. It was CAM that helped to transform Planit’s financial fortunes a couple of years ago by helping the directors to utilise assets already in the business. This included placing some of its Intellectual property inside a pension trust and using that same trust to secure much needed funding. Subsequently turnover has soared from £1.5 million to around £4 million in 18 months.

CAM, which offers specialist financial services to business and individuals throughout the UK, also gives information and services to clients with IP issues. Clifton Asset IP specialist Tina Rees-Pedlar said: “We offer trademark registration as well as watchdog services to monitor infringements. We can also point clients towards specialists who can help them protect their IP.

“One effective protection, especially for firms with limited resources, is to cede IP rights to a company pension trust fund. The pension scheme can then pay patent renewal fees. It also ensures that even if the business runs into hard times, the patent remains safe and secure within the pension trust fund.”

She added: “It’s a useful strategy, too, for retirement since patents can continue to provide licensing income
through your pension scheme. I know of one couple who have two patents licensed to separate companies, both of whichpay a proportion of sales income to their pension scheme.”

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