When Kevin Meagher left the RAF eight years ago his wife thought he was having a mid-life crisis. The idea for which he gave up his post as group captain was that people could manage their security devices over the web, and be alerted to an intruder on their premises by phone, text or email. Last month, he won the prize for innovation at the European Business Awards from a shortlist including BT and Daimler.
The principle behind the system is much the same as the fast combat jets on which Meagher worked as an engineer: all the plane’s functions are integrated with a computer in the centre. Fighter pilots might be accustomed to such fine control, but the security industry is not. ‘We have a proposition that offers twice the service for half the price,’ boasts Meagher.
For his business, Intamac, Meagher has adopted a model that licenses software to leading players in telecoms, insurance and utilities. This year, turnover is approaching £2 million and Meagher employs 30 people in Northampton, with satellite offices in North America, Australia and Korea.
The complication for Meagher is that web-based applications are hard to protect. He says: ‘We use patents where we have hard and fast evidence of technical innovation. Otherwise we look at protecting our IP [intellectual property] right through the supply chain.’
See also: How to protect your intellectual property as a start up or scale up – Zain Ali of Centuro Global explains what to do and why
So far, Intamac has three patents and five trademarks. There have been several attempts at copying its technology, as well as efforts to replicate its proposition. Usually, Meagher has been able to reach a resolution through an exchange of letters. He was on the point of going to court once, before a competitor agreed to stop what they were doing. ‘There is quite a bit of gamesmanship,’ he says.
His second line of defence is to take his technology to market through a major supplier like BT. Meagher adds: ‘If they are investing £10 million in launching what we have built for them, there aren’t going to be any frivolous disputes.’
A lot to lose
IP is a high-stakes game, says Simon Crossley, a technology partner at law firm Eversheds: ‘It is capital intensive. If you prevail, you control the market. The hard part is finding an idea that is going to underpin your business. Once you have it, then look at the rights to prevent you being ripped off.’
He estimates that for between £40,000 and £60,000, you can gain full worldwide cover for an uncontested patent. In the life sciences, such gold-plated protection is a necessity. Otherwise, no-one will give you the time of day. In software, you might prefer to rely more on copyright and trade secrets, which are free, but weaker.
The main remedies against copying are damages to compensate you for loss of income and an injunction to ban someone from ever selling a product again.
‘Sometimes you want to put on the Doc Martens and kick the door down. Other times, you take a more softly-softly approach,’ Crossley says.
Even for technology start-ups, Crossley has taken disputes straight to the High Court in London. In a patent case, each side will generally incur fees of £300,000 to £400,000. Trademarks are normally less technical, so the costs are usually between £30,000 and £40,000. If you win, however, you will get most of these costs back.
The brave minority
Few are prepared to take the risk: only about five per cent of IP disputes ever reach court. ‘Fly-by-night operators tend to disappear at the first sight of a lawyer’s letter. If the other party is well advised, it will back down once the case becomes clear-cut. You can then do a deal on your terms,’ he adds.
For international cases, think about efficient points in the distribution channel for stopping it. ‘Look tactically at where the goods are being made and sold. For a Chinese knock-off, for instance, either stamp it out at source or pursue it through customers in markets like the US,’ counsels Crossley.
The size of the challenge can take you by surprise. At a recent trade show in Guangzhou, China, Roland Hill found 51 examples of products that would infringe his IP once imported to the UK or any other of the 20 countries in which he holds patents. Two have signed up as licensees. The others appear indifferent.
‘I try to get the message over that they will not have a steady business if they infringe,’ says Hill, whose technique for printing one-way images on glass is used on billboards, buses and buildings in cities all over the world. ‘Anyone who makes unlicensed use of IP is potentially liable [to face some form of legal action].’
Since 1985, Hill’s company, Contravision, has built up a portfolio of 23 patents, which are licensed for 400 different product applications: ‘If we didn’t have patents, we wouldn’t be here. They are the essential currency in winning, licensing and defending our business.’
Hill has initiated court action on three occasions. Each time the other side has wilted at the prospect of paying £1 million in legal fees. Usually, Hill uses other means, such as naming and shaming, and he will appeal to the chief executive’s common sense. ‘Chief executives have a greater appreciation of IP. But we have lost a lot of money because the patent system is difficult for small companies to use,’ he says.
Enterprises should never think of IP as their golden goose, says Stephen Carter, a technology attorney at Mewburn Ellis: ‘Sadly, no-one makes any money out of just filing a patent. Returns on innovation only happen when you fit your claim to a stream of revenue. Otherwise, you will find yourself paying a heavy price for exclusivity.’
Rather than automatically taking an expansive approach and protecting all your ideas, Carter suggests you identify the cornerstone of what you are going to be offering. If this is done, you will get the most value out of your IP by protecting an idea that underlies everything else.
The difficulty is not to be too greedy. He says: ‘Of course, you would like to find a platform with other applications, but a broad claim is hard to make and expensive to maintain.
‘If competitors can take your product apart and analyse how it works, then a patent is generally going to be your strongest form of protection. However, if you can realistically keep your techniques under wraps, then trade secrets might be a better option. In practice, you might choose to use a combination. Patent key features, but rely on trade secrets for the black box in the middle.’
In a single afternoon, Nicholas Miller, the CEO of Kyp Systems, (pictured, left) discovered the value of having a competitively focused IP strategy. One of the major utility companies had lifted his idea. After a brief session with the lawyers, the transgressor agreed to pay damages and destroy all its stock. They also placed a large order for Miller’s innovative marketing technique: the iKyp (or information you keep in your pocket).
The idea is to give customers a more lasting experience than the usual marketing promotion. With backing of over £5 million, Miller has set out to create a new genre for brands. Based on techniques in paper engineering, he has designed a sophisticated information tool that consumers will use and keep. It is already making sense for the O2 Millennium Dome: marketing response rates have risen from two per cent to seven per cent.
Miller is spending £250,000 on protecting his ideas through patents and design rights in Europe and North America. Because he has secured the rights to the medium, Miller can operate on a large scale. So far he has produced 120 different variations of the iKyp, which are produced by one of China’s leading paper engineers.
Even if someone has a go at copying him, they would now struggle to match his unit costs. ‘After the IP,’ says Miller, ‘our volume give us a powerful second line of defence.’