Intellectual Property Advise for the Company.
First, let me take this opportunity to congratulate you for finding a way to make the lightweight rainwear jacket hood that does not cover the wearer's face. The move is likely to spur competitive advantage of the business in the regional, as well as international market (Grossman and Helpman 49). However, the move is just the first step; there is a long way to go to make sure that the business exclusively benefits from the solution we have just discovered. The legal way to do this is to identify the kind of intellectual property (IP) measure that will protect this idea. The IP issues in this case are multifaceted. The issues cover the design of the jacket as lightweight rainwear jacket hood not covering the wearer's face as well as the idea on how to make a jacket. Before, we delve into the two aspects, and how they can be protected for the benefit our organization, it is imperative that we first look at the fundamental role that IP play in our business.
Intellectual Property is a widely recognized legal concept that promotes innovation and economic development for innovators. Success in virtually all businesses from multinational corporations to small entrepreneurship rely majorly on the use of intangible assets like IP titles to attract extra revenue. IP represents the product of a person’s inventive mind. As Davies (4) asserts, it can cover an invention, trademark, original design, or practical application of a worthy idea. In commercial terms, IP refers to propriety knowledge of business organization that is a key component of success in every business. Protecting IP rights is very essential as it gives a business a competitive advantage over other similar ventures. IP rights include confidential information, patents, designs, trademarks, copyright, circuit layout rights, and plant breeder’s rights. Copyright and circuit layout rights are automatic while patents, trademark, and design are not. They must be registered with the government agency dealing with IP so as to be protected against infringement.
The company requires registering both the design of the jacket as well as the idea on how to make it as its intellectual properties. The registration will grant it IP rights that would be a reward for its creativity. Other than registering the IP, the company can use other strategies to ensure these rights are protected against third party infringement. These measures include:
Maintaining Trade Secrets
The company needs to put in the place mechanism to ensure trade secrets. Trade secrets provide effective protection for some technology or formula like one we have on how to make a jacket. The secrecy nonetheless does not prevent any other person from inventing the same product or process and use it for commercial purposes (Maskus 129). Therefore, it does not give the company exclusive benefits over the design or the solution.
Using this method will expose the company to competitors in case its current employees with knowledge on how it works leave the company. It is also difficult to maintain such secrets in the long term when a large number of people know about the solution. It is difficult and costly to enforce, as the company will have the burden of proving a breach of confidence under common law. If the department will have to use this method, then it must make sure that the manufacturers of the jacket as well as the employees have signed written undertakings not to compete with the company in case and when they leave the company (Sell 16). The undertaking will simplify the process of enforcing the IP rights, as it will no longer be necessary to prove a breach of confidentiality but a violation of the written undertaking.
Registration of Patent
The company can also protect the design of the jacket through a patent. The patent will refer to the new process discovered after massive research on how to produce the jacket hood. Under patent laws, the invention can only be registered as a patent if it is conceived and put into practice (Ullrich 405). A patentable invention has the following elements:
- It must be new
- It must be useful
- Should not be obvious.
The solution that the department has come up with is new, doubtlessly useful and was not obvious as it took years of research to be invented. Therefore, the solution squarely falls into a patentable invention category. Before registering the solution, the company needs to search the patent and design databases to ensure that the idea is new (Sell 4). It should also educate all workers on their obligations to hold the invention in confidence at least until it is patented.
Registering a patent at the national level does not guarantee your protection in the international market. Although there are different procedural as well as substantive rules on patents in a different jurisdiction, international agreements have been formulated which simplifies the procedure of obtaining IP rights in other countries. An example of these agreements is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). This agreement commenced on January 1, 1995. Reichman (461) argue that the objective of the agreement was expounded upon in the case of Canada—Patent Protection of Pharmaceutical Products. In this case, it was held that the main objective of the TRIPS agreement is to create a balance between the IP rights established by the agreement and other fundamental government policies of the members’ states. The agreement gives every nation the right to adjust patent rights to maintain a balance with their national policies. It is for this reason that the company has to find out patent policies in the international market so as to protect its interest in accordance with the principles of international trade law.
It is important to note that not all States are member States to this international agreement. It is, therefore, necessary to find out which rules apply in the respective States before the company exposes the idea to these foreign markets. It is a general principle of international law that once you apply for IP protection at the domestic level, you can also seek for similar protection in other countries (Davies 8). The application should however be done within certain limitation periods. For patents, the application should be done within 12 months from the date of the first application. Designs require to be registered within six months from the date of the first application.
The Nature of Rights Granted by a Patent
A patent grants the owner of the idea the right to exclude others from practicing the invention. If any other person without authority of the inventor, the inventor reserves various remedies against such a person. These remedies include a letter of warning, negotiation for out of court settlement, as well as court settlement. Any recourse adopted by the inventor should be pursued as quickly as possible (Austin 209). Any delay may render the legal right time barred. It is important that the company protects its IP right in this business. If it fails to do so, may put the business at risk. Once the company owns this right, it will be responsible for monitoring the way it is used as well as protecting it against infringement. It is only through such a measure that the company will turn this great idea into a commercial reality.
Rainwear business is a project that the company needs to invest in as fast as possible. The company needs to tap into the available opportunities to ensure that the solution it came up with is put into practice. The choice of who manufactures the rainwear is just as important to the business as is the idea itself. It begins with an understanding of your identity as a business as well as your unique competitive advantage (Shapiro 671). The company will have to determine the comparative advantage of the potential manufacturer for its product. The marketing of this product will largely depend on market’s perspective about the quality of the manufacturer. It is, therefore, imperative that the business enters into a contract with a manufacturer that enjoys a renowned brand for its quality products. The Chinese company raises mixed opportunities to the company. There are various risks and benefits that the company will accrue by contacting this company to manufacture its rainwear.
Risks of securing the Chinese Company’s services
There are various risks that any company should anticipate when recruiting services from another company to manufacture its products. These risks become even realer when that company comes from a different country. (Shapiro 662) Such risks include harm done on the company's brand identity due to the fault of the manufacturer. A company can spend years building a positive image of its brand to its target market. However, a company licensed to manufacture goods that bear the trademark can trash all this efforts in a very short time. The effect may erode this goodwill and turn it into floodgate of litigation, angry commentaries, and commission hearings. It is, therefore, important for a company to take judicial notice of the 1996 incidence concerning Kathie Lee Gifford and Wal-Mart (Grossman and Helpman 18). In this case, allegations arose that Kathi Lee Gifford Company, which was licensed by Wal-Mart to manufacture apparel line, had done so under sweatshop condition in a Honduran factory. Kathie Lee came out in defense of herself against the accusation that she was responsible for worker mistreatment, but the damage to Wal-Mart brand had long been done. Other risks include:
Losing control over the manufacture of your products
Experience relationship difficulties with your business partner
Business partners are crucial if the company wants to remain successful in the market. However, these partners may not approve of the plans to involve a Chinese company in the manufacturing process. It is important that the company seeks the opinion of all its partners before recruiting the services of a Chinese company.
The company may fall victim to IP theft or misuse
If the business does not register its IP rights over the products it wants manufactured in China, there is a likelihood that the Chinese company may register the idea as their own and enjoy all the benefits appurtenant thereto.
The benefits of securing the China Company’s services
China is considered as one of the fastest growing economies worldwide. It is also rated as the most attractive investment destination for many industries. The government has tremendously put in place plans that encourage foreign investment and new material manufacturing (Shapiro 668). These measures are geared towards modernizing the country's manufacturing sector. The country thus provides great leverage for the company to benefit in its business. The country provides a low-cost labor, enormous and rapidly growing domestic product, as well as significant government incentives, which attract foreign investment. These benefits will clearly enhance the revenue that the company will get from manufacturing using the Chinese company.
The company is also set to benefit from being associated with high-quality products that have recently come from china. China opened its market to external investors during the 1970s. Since this period, its manufacturing sector has caught up with developed countries. This improvement in quality of products from china can be reflected in three ways. First, Chinese exports worldwide rose from 1.2% in 1983 to 8.0% in 2006 coming just behind Germany and U.S.A worldwide. Secondly, the number of registered trademarks in China also increased. By the year 2005, application for trademark registration in china hit a whopping 664,000. Finally, since 1990s, china has experienced a growth in the patent application. All these point to the fact that the quality of products manufactured in China can be trusted to be of high quality (Shapiro 78). This improvement in quality can be attributed to the market competition and foreign investment in the Chinese market.
- It was actively engaged in selling or distributing the product
- It exercised control over the manufacturing exercise
Although the liability is less likely to be attached to the brand owner, it is important for a company to exercise maximum caution to avoid reputational harm. Its brand image would be in jeopardy if it lets the Chinese company engage in unfair labor practices or unsafe product manufacturing. Such a mistake would be costly and will affect the brand image for many years to come as was demonstrated in the Kathi Lee incident. However, while the risk of legal liability to brand owners may be low, the risk of reputational damage, from unfair labor or unsafe product accusations, can be enormous, and can damage the brand for years afterward, as was in the Kathie Lee incident.
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