Companies that prioritise intellectual property (IP) protection and strategy are typically brand conscious with innovative products or services, brand recognition or ambitions for market influence. However, the growth and development of a company is a long-term process, which entails varying degrees of IP protection during different stages of development.
While mature business operations and effective IP protection strategies are critical to a company’s development, early-stage companies often prioritise solving immediate business challenges, rather than necessary IP protection, leading to inadequate long-term IP planning and potential difficulties in protecting their IP in later stages.
To help companies formulate comprehensive IP strategies during their development stages, this article provides guidance on IP protection from a long-term perspective.
SHORT-TERM PLANS
Partner
Shanghai Pacific Legal
During the early stages of a company’s development, where the need for IP protection arises, the focus of a company is primarily on rapid business development. Therefore, the demand for IP protection is often expected to solve existing problems quickly and effectively.
In this context, short-term plans that can address immediate IP issues at a lower cost become more appealing.
However, while solving IP issues pragmatically is in many cases commendable, short-term plans that ignore comprehensive consideration of future IP risks and strategy may pose future hidden dangers in the company’s development.
For example, a sports brand operating for many years faced a large-scale business operation under a different name following years of litigation due to infringing prior rights. In the early stages of the company’s development, “hitchhiking” may indeed be easier to achieve rapid development – but once a brand is “hitched”, it is equivalent to giving up the opportunity to develop an independent brand.
In the event of a prior rights dispute, the company would require significant financial and material resources to handle the lawsuit and prevent damage to its reputation. After a prior rights dispute with the IP owner, not only does it require a lot of financial and material resources to deal with the lawsuit, but it also has a negative impact on brand reputation.
If the subsequent outcome is unfavourable, the many production and management efforts that supported the brand’s influence will be in vain.
In addition to trademarks and company names, there are similar cases involving other types of IP rights, and the impact on the company is worth noting.
There are various types of short-term plans, and if potential risks can be considered, these plans can be excellent. However, short-term plans that solely address present issues without considering long-term goals may not effectively prevent future IP risks.
For example, hastily applying for patents for the sake of being recognised as a technology innovation enterprise without possessing the conditions for technological innovation – or applying for trademarks and domain names without conducting prior searches – may lead to disputes due to infringement of prior rights.
POTENTIAL ADVERSE EFFECTS
Short-term plans often require paying special attention to potential risks, which are often difficult to predict. Using the analogy of human health, short-term plans may be more readily welcomed by patients, just like drugs that take immediate effect after illness.
However, if these drugs have not undergone safety and efficacy tests before being marketed, it is also difficult to discover fatal side effects. At the moment when the pain occurs, patients often care most about how to quickly and effectively alleviate the pain, which can easily overlook accumulated toxic side effects over time. Even today, some people still purchase unlicensed drugs after falling ill.
Returning to the solution of IP issues, many companies choose short-term plans that have not undergone risk assessment when problems occur because they expect to quickly alleviate current problems, thereby causing greater difficulties for future development.
THE COST
Short-term IP plans often have economic characteristics due to fewer considerations and a focus on specific current problems. Companies in the initial development stage are also willing to choose cost-effective plans.
However, if short-term plans are not combined with risk assessment and long-term IP strategies, the cost of remediation required later will be much higher than the cost saved in the initial period – not to mention economic losses caused by the wrong plans themselves.
This is also why highly competitive companies are often willing to invest more in IP protection.
KEY TAKEAWAYS
Because the attractiveness of short-term IP plans and their potential hazards are difficult to identify quickly, companies in the early stages of development cannot rely entirely on their own judgments of the benefits and drawbacks.
In this case, seeking advice from professional institutions and choosing the right direction according to their evaluation is often a better choice than taking shortcuts or unconventional methods, which often contain many unforeseeable risks. These should be avoided, especially when judgmental ability is not yet matured in the early stages of development.
It may be easier to make suitable choices by using limited conditions to analyse possible long-term plans – considering the benefits and risks from multiple perspectives in overcoming blind spots – and then comparing them with short-term plans. As long as corresponding awareness is present, the long-term nature of IP strategies and early arrangement will benefit companies with long-term goals in future development.
Frank Liu is a partner at Shanghai Pacific Legal
Room 2709, 27/F, Plaza 66 II
1266 Nanjing Road West
Shanghai 200040, China
Tel: +86 21 6086 0199
Fax: +86 21 6086 0111
Email: frank.liu@shanghaipacificlegal.com
