Step 5: Business opportunities
In order for an intellectual property right to be worth something, other people must be interested in using what has been protected commercially.
Possible recourses and sanctions
Being the holder of intellectual property rights actually means nothing in itself. A condition for an intellectual property right to be worth something is that other people would be interested in using what is covered by the intellectual property rights. There must therefore be a market to do the same thing as that which is protected. Through the holder of the intellectual property rights having exclusive rights, the market can be controlled to some extent, which may of course be advantageous financially. The intellectual property rules concerning patents, trademarks, design protection and copyright, etc. are very similar as regards the sanctions (particularly penalties and financial compensation) which can be imposed on anyone who violates the exclusive rights. We will therefore consider all intellectual property rights collectively.
It is not certain that the holder of the intellectual property rights can or will market what has been protected. Intellectual property rights can then be used as a means for bringing about various forms of collaboration with other actors in the form of, for example, agreements through licensing, franchising and the acquisition/sale of individual intellectual property rights or whole companies. In this way, you can make money on your own intellectual performances without actually manufacturing a product or providing a service yourself.
5.1 Own production and sale
One way of exploiting your exclusive rights is of course to produce the products or services that are covered by the exclusive rights yourself. The various rights each give slightly different protection. You can find out more about this in Chapters 1 to 4. If there is strong demand for a product which is covered by the patent claims in a patent, a patent holder can receive income from the entire market for the product. if a trademark is very attractive, the trademark holder can receive income from products or services which are sold under the trademark. The holder of design protection receives income from products with the design which the protection concerns. The copyright holder can receive income from text, art, computer programs or music, etc. which has been created.
The disadvantage of doing everything yourself is that there may not be sufficient time, knowledge and resources within your organisation to reach out to a broad market. This may be because your organisation does not have sufficient knowledge of production, marketing or logistics. You can then use your intellectual property rights to obtain a bigger share of the cake which can be created through various forms of collaboration with other actors, which the holder of the intellectual property rights may not have.
5.2 Collaboration through agreements
Collaborations can work in many different ways and be more or less complicated. The general rule is that collaboration takes place through agreements. This means that the parties enter into contracts. Contract law is a separate area of law which is very wide-ranging. In this context, we should mention that the general rule in contract law is that if someone has reached an agreement, it will apply. An agreement which has been established must therefore be followed. Agreements are often established in writing, but this is not usually a requirement. Of course, a written agreement makes it easier to determine and interpret what the parties have agreed.
A common way of permitting others to use an intellectual property right is to give express permission for it. This can be done in return for financial remuneration. In such cases, the holder of an intellectual property right is often referred to as granting a licence to use what the holder otherwise has exclusive rights to, subject to certain conditions. The parties can sometimes choose to enter into an agreement concerning different forms of determining the prices that end consumers must pay for a product or dividing up markets in various ways, e.g. through exclusivity. There will then be a considerable risk that the parties will breach competition law, which is not permitted. Watch out for this! In Chapter 7, you can read more about competition law; see also the introduction.
However, reaching agreement on the remuneration that a licensee is to pay the licenser is permitted. The remuneration can consist of a one-off amount, an annual fee, a share of the turnover, combinations of these aspects or in exchange for something completely different.
A more advanced form of licensing is usually known as franchising. Franchising is normally about whole concepts which are regulated in detail in an agreement. The basis is often a trademark and/or company name, but such agreements often state that the holder of the exclusive rights has knowhow and logistics to which the franchisee gains access in return for remuneration. McDonald's, ICA, Pressbyrån and Taco Bar are examples of chains which are largely run through franchises. As an external party, it is often difficult to know how a franchise works, as franchise agreements often contain information which constitutes trade secrets or which is otherwise confidential (see sections 7.2-7.3).
Selling rights or companies
It is also possible to buy/sell intellectual property rights. In this way, the commercial opportunities are transferred to the buyer. Intellectual property rights are often considered to be assets within a company which can be very valuable if they general substantial revenues. Entire companies can also be bought or sold where what is regarded as being important can be considered to constitute the company’s intellectual property rights. However, both the buyer and the seller must analyse what different intellectual property rights are worth, which can be difficult.
5.3 Sanctions and possible recourses in the event of infringement of intellectual property rights
In order to establish an agreement, it is important to know what sanctions could be relevant if someone were to infringe intellectual property rights. The threat of sanctions is the intellectual property right holder’s tool to induce others to stop infringing or enter into some other form of agreement. There are sanctions under both administrative law and civil law. The sanctions in civil law concern possible recourses for the holder of intellectual property rights to receive compensation for infringements. This is also known as ‘damages’.
Although official sanctions primarily concern the party that committed the infringement and the state, these sanctions can also deter others from committing infringements, which in turn benefits the holder of intellectual property rights.
Infringing an intellectual property right is a criminal offence if it is committed wilfully or through gross negligence. The sanction that is imposed in such cases will normally be a fine, but imprisonment is also a possibility. Perhaps most spectacular was the so-called “Pirate Bay judgement”, where four people were sentenced to imprisonment for up to a year for aiding and abetting certain infringements of intellectual property rights committed by users of Pirate Bay.
Seizure, prohibition and fines
In some cases, courts can order property which has been used for criminal acts to be seized. Courts can also impose bans on the further use of a particular intellectual property right. Decisions may be linked to a fine. In these cases, a fine means that the actor may have to pay compensation to the state if the act continues to be perpetrated.
Possible recourses under civil law
You have no doubt heard about IPRED, which stands for "Intellectual Property Rights Enforcement Directive" and is an EU Directive. There is therefore no individual “IPRED Act”, but the various intellectual property laws have been amended as a result of IPRED. One of the purposes of the directive is to give right holders practical recourses in order to assimilate their rights.
The most interesting sanction from a financial perspective is the option to obtain financial compensation. Even without wilful intent or negligence, anyone who commits an infringement must pay reasonable compensation. The compensation may also be greater if the infringement takes place wilfully or as a result of negligence. When the amount of compensation is determined, consideration is given to a number of factors including the right holder’s lost profit, the profit which the party that committed the infringement has made, damage to the reputation of the intellectual property right, non-economic damages and the right holder’s interest in the infringement not being committed. One of the basic premises is that no one should be able to make money by committing an infringement. The sanction should therefore be tougher than if the actor had opted to pay a licence fee for the use. In the Pirate Bay decision, total damages amounting to almost SEK 50 million were awarded. In US patent disputes, it is not unusual for vast sums of money to be awarded in compensation.
In the context of criminal law, the state can search properties and seize assets to collect evidence against a suspect. This was not previously possible for individual right holders. Right holders now have the opportunity to initiate an information injunction and/or an infringement investigation.
Information injunctions entail an obligation to disclose information to the right holder concerning origin and distribution networks, among other things. An injunction can be aimed at certain actors who have come into contact with the products or services that the infringement concerns. These actors do not need to have done anything unlawful themselves, e.g. actors who provide broadband services.
Infringement investigations, often known as “dawn raids”, are ordered by a court at the request of the right holder or a licensee. The Swedish Enforcement Authority carries out the infringement investigation, which means that evidence can be collected from certain premises used by the other party. However, as with information injunctions, there are many restrictions. It is therefore not simply a question of obtaining an information injunction or initiating an infringement investigation.
5.4 Possible financial recourses and risks for parties
As the holder of an intellectual property right, difficult strategic decisions can sometimes have to be made. On the one hand, the sanctions that are available can be used as a bargaining tool in negotiations with a counterparty. In addition, there are examples of legal cases where actors which have committed infringements have been hit by tough sanctions. Not responding to an infringement in order to set an example may also be a sign of weakness, which could damage the respect that is accorded to the right. On the other hand, it may take time and be both expensive and complicated to dispute an infringement. If the other party has no assets, it may also be difficult to get anything back even if you win a dispute.
Disputes also mean that the party that loses may be forced to pay not only his own case costs (costs for lawyers, etc.) but those of the other party as well. In complicated cases, this can involve large sums of money. This may mean that neither party considers it worthwhile risking the uncertain outcome of a dispute, making it easier to reach a solution which is acceptable to both parties.
Many actors will not risk committing infringements, which results in them keeping a certain distance. This can be a good idea, as the company is then free to concentrate on selling products and services rather than risk becoming involved in expensive and complicated processes with an uncertain outcome.