Six most costly and common IP mistakes SMEs made in 2016 – Part 2

This two-part series highlights the fundamentals IP mistakes associated with small businesses. And the stakes are high – according to the Australian Bureau of Statistics, 74.6 per cent of businesses with zero to four employees have “no intellectual property protection.”

Here in Part 2 we cover the basics you need to know about copyright, IP ownership and trade secrets.

4. Copyright

Copyright protects the expression of an idea.

Copyright infringement was another quagmire in 2016. The number of cease and desist letters relating to copyright infringement sky-rocketed and shows no sign of slowing.

The explosion of copyright infringement seems to be linked to the growing obsession to live life and share every aspect of business online.

This is the easiest of all intellectual property rights for SMEs to ensure that they do not infringe, by simply ensuring that they only use original content, or properly licensed content.

Many of the allegedly infringing activities came from contractors or employees such as web-designers and ghost writers who did not ensure that the content they provided was properly licensed for reproduction.

5. IP ownership and contracts

Disputes arose in 2016 over IP ownership. Many of these legal disputes could have been avoided by ensuring external and internal agreement as to intellectual property. This should be to be covered off in terms and conditions, employment contracts and service contracts.

Some SMEs were devastated to learn that they did not own IP in written and graphic material created for them. They thought they were getting intellectual property ownership, but either the contract said something different, or the Copyright Act default provisions meant that that they did not automatically obtain copyright ownership.

Be careful of what you agree to when signing up with providers. Some well-known companies have intellectual property clauses that effectively mean that they can appropriate your IP if you use your services. Just because others have fallen into this trap does not mean you should too!

From 12 November 2016, standard contracts with small business must not contain “unfair terms.” The new unfair terms in relation to small business have not yet been tested, but many businesses are not yet aware of the need to review their standard contracts. A high percentage of contracts reviewed have shown a breach of these new provisions. For more information about these provisions see the relevant ASIC web page:

6. Trade secrets

Once again 2016 was a year for disgruntled (former) employees, potential business partners and competitors to make a meal of information that was intended to be kept confidential.

Once the genie is out of the bottle, there is no putting it back, even if the leak is unauthorised. Appropriately worded employment, contractor and other agreements can minimise this risk.

This also applies to potential investors, who should be bound by an NDA (a non-disclosure agreement). Where an investor refuses to sign an NDA, the SME would be well advised to carefully consider whether the potential investor is the right fit for the business. Without the NDA in place there is nothing stopping the investor from taking the idea as their own.

Cathryn Warburton, Partner, Acacia La