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Rights and wrongs
In today’s globalised world, UK manufacturing businesses are becoming increasingly reliant on innovation and know-how to gain an edge over the competition. Higher labour and overhead costs in the UK mean that competition has to be on more than price alone. So companies have to offer something unique, and they need to protect it with intellectual property rights (IPR).
By protecting innovations, intellectual property (IP) acts as an incentive for firms to invest in research and development. This protection can come in the form of patents, copyrights, trademarks or design rights.
Patents are especially prevalent in the manufacturing industry, providing businesses with a period of exclusivity, in which they are able to recoup research and development costs without fear of others exploiting their inventions.
Paul Leonard, director of London’s IP Institute, notes that the UK has gone from “making stuff to owning ideas”. For many companies, their most prized assets are now intangible – and protected by IPR. “And that is the big deal,” says Leonard. “More so for the UK than for other countries, because we don’t have a huge amount of natural resources. But we have still got a very strong science and technology base.”
As western companies seek to exploit the Chinese market, it’s no coincidence that the issue of intellectual property is high on the agenda. “Without IPR, we can’t compete with China,” Leonard states. Fortunately, China seems prepared to play by the rules set out by the WTO. “There is every reason to believe China is embracing its obligations,” says Leonard, who himself is helping to train Chinese judges at the IP Institute.
The UK government too has recognised the increasing importance of IPR. In December 2005, the Treasury launched an independent review into the IP framework, examining the instruments of IP, the operations of the UK system, and the effects of globalisation on IPR. Results of the review are expected in the autumn.
But acknowledging the importance of IPR is just the first step. Enforcement is another matter altogether. As one Treasury spokesman told Blue Skies, “Businesses are often unaware of the challenges involved in protecting IP internationally, and the costs involved in securing and enforcing rights can be very expensive, particularly if professional advice is needed in each country to ensure adequate protection.” Leonard agrees: “IPR is difficult to enforce on a global level.”
One of the problems is that the US has a very different patent system to the rest of the world. And within the EU, member states tend to have their own interpretation of IP laws.
That’s why Leonard advocates a common European patent system, known as the Community Patent (CP). “We need a patent that is litigated in a central court with the same criteria that everybody understands, covering the whole European community,” he argues. “This would make a huge difference to the manufacturing industry.”
But Mike Barlow, head of IP at BP, doubts businesses will ever agree on what such a patent should look like. “Industry would like to see the Community Patent taken off the table,” he suggests. Still, after being on hold for several years, the EU seems to be moving forward with its CP. The Internal Market directorate-general sent out a questionnaire in early 2006 regarding the future of patents. The results are due to be presented in Brussels in June, and according to Barlow, “It will be very interesting to see what comes of it.”
What business wants is a legal framework with a predictable outcome, Barlow states. “The system we have now may be complicated, but at least we understand it. If you make changes, this can lead to uncertainty, and this in turn could lead to fewer innovations,” he warns.
Aside from being complex, the current IP system is expensive. For instance, a patent right obtained in one country, needs to be translated in the national language of the granting authority. As companies have gone global and filed patents in ever more countries, especially in the Far East, they have had to pay out for those translation costs.
Another obstacle to the current IP system is the high legal costs involved with IP infringements. That may explain why little patent litigation goes on in the UK, with most cases settled out of court.
For now, the message seems to be that as manufacturing expands across borders, companies need to be on the lookout for strong IPR laws. As Barlow puts it: “If we take our technology to a foreign country, it is likely we’ll employ local people and tell them our trade secrets so they can do their job. We need to know there are laws in that country to stop them from taking those away.”
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