The Competition Problem
Consumer product companies in the 21st century must be nimble and capable of fast execution. Competition has never been so fierce because of the proliferation of the global economy, including typical market competitors, former manufacturers, and future competitors who currently work within the company.
No industry is faster and more aggressive than the fashion and beauty industry. To make matters worse, trends and styles are typically short, such as one or two seasons. As such, the ability for competitors to financially impact a “hot” new design through counterfeiting can be financially devastating to the bottom line of an originating company.
Historically, companies mainly faced competition within the U.S., but the ease of transportation and marketing via the web makes anyone a potential competitor. While technology increases speed of product development, technology, such as 3D laser scanners and mass spectrometry, increases speed of reverse engineering or copying others’ products.
Manufacturers, most notably non-U.S. manufacturers, will sometimes continue to produce and sell your products to other distribution channels during an engagement and after you switch to a new manufacturer. Even with property agreements and security measures, counterfeit products produced from the actual production line happens in the real world. There are many other real world scenarios in which counterfeit product is produced without being able to identify the actual source.
Companies always face the challenge of current employees or contractors, such as computer programmers, who leave the company. These employees often have access to designs, especially in the form of software, and sometimes confidential or trade secret information.
Consumer Product Competition Challenges
As a result of the ease of copying, reverse engineering, and unscrupulous manufacturing partners, consumer product companies often find themselves with unexpected competitors shortly after releasing a new product, oftentimes within a few months. And, the more popular the brand, the faster the competitors show up. To make business even more challenging, the ability for competitors to distribute knock-offs has become much more pervasive on Internet sales platforms (e.g., Amazon, eBay).
Two possible competition defenses include (i) having intellectual property (IP) protection and (ii) out-marketing the competitor. The out-marketing can be challenging with today’s low-cost online marketing tools. Takedown policies for IP infringement varies for each major sales site.
Intellectual property generally includes patents, trademarks, copyrights, trade secrets, trade dress, and know-how.
IP Housekeeping
Patent Assignment Provision: All executives, employees, and contractors / consultants need to be under a duty to assign intellectual property, most notably inventive ideas. Without a written assignment, the invention owner is the employee, and their ability to leave your company with the idea to become or join a competitor, or worse yet, license your technology to a competitor (yes, it is legal)! Having the patent assignment should help to deter executives, employees, and contractors from becoming a competitor.
Copyrights: For products that include software or copyrightable design elements, a copyright application should be filed with the U.S. Copyright Office for each and, for software, at each major update. File within 3-months of publication to be guaranteed statutory damages (and attorney fees) in the event of infringement.
Trade Secret Protection: Maintain a list of trade secrets and limit access to individuals with a need-to-know.
Intellectual Property for Consumer Products:
Such fast pace competition has placed a higher burden for securing IP earlier in a product life cycle. How can you do that? Here’s a strategy for better integrating your IP program with product development to secure the IP earlier in the product life cycle.
A systematic working relationship between a product developer and IP counsel needs to exist. Communications should occur at phases (I) after concept acceptance but before design / engineering, (II) after engineering design is completed, and (III) after prototyping is complete and prior to production or product announcement.
Phase I: For consumer products, because the cost of patent infringement is so high, it is strongly recommended to conduct a Novelty Search and/or Freedom-to-Operate Search (a) to help ensure that the concept has innovative features that are potentially patentable, and (b) to help avoid patent infringement. From the search results, the patent counsel can focus on inventive features to protect the product, and guide the company how best to avoid patent infringement. Consider filing a provisional utility patent application and/or design application(s) at this time.
Phase II: After the design is completed and the inventive features are identified, file patent application(s), either provisional or non-provisional depending on the potential for the product to further evolve. Budget may also play a factor in the decision. Note: for products with unique ornamental design features, file design application(s) to avoid unintentional loss of international rights. Because fashion and beauty can trend very quickly, it is strongly recommended to a patent application with an Expedited Examination Request, as described below.
Phase III: Perform a final check to see if any additional product features need to be protected.
Make sure the company’s workflow includes the IP attorney to sign off to ensure all patent filings are complete before announcing or releasing the product! Also ensure trademarks and copyrights are or have been filed, and patent and trademark clearance assessments are within acceptable risk tolerances.
Timing is Everything:
Patent Applications: Time to Grant: Utility (normal: 18-30 months; expedited: 6-12 months); Design (normal: 12-18 months; expedited: 5-9 months)
For consumer products, the goal is to obtain a granted patent ASAP to enforce against competitors. Both utility and design patent applications can be filed with an Expedited Examination request. When Patent Examiners examine accelerated applications, a more “cooperative” examination typically occurs. Design patent applications filed for Expedited Examination (under 37 CFR 1.155 must include form PTO/SB/27) require a pre-examination search to have been performed and a listing of classes/sub-classes along with an Information Disclosure Statement.
By filing a patent application with an Expedited Examination request, a patent that covers the product is hopefully ready for use and marking of newly released products for maximum defensive advantage (i.e., give notice to competitors, enable online takedown, remove counterfeit or copycat products from store shelves, recover damages).
Trademarks: Time to Grant: 12-18 months; No expedited filings.
Once possible product names are determined, clear the names to reduce the chance of having to rename/rebrand and submit for a federally registered trademark as early as possible so that a registered trademark is granted prior to or early in the life of the product. Given the current backlog at the USPTO, it is not uncommon for companies to have to wait in limbo for acceptance, so the earlier a trademark application can be filed the better.
Remember, in the US, common law trademarks are also available without a federal (or state) registration and are acquired through actual and proper use of the trademarks in commerce.
Copyrights: Time to Grant: Normal: 6-12 months; Expedited: 10 days
Be sure to copyright as much of your product as possible, including manuals, photos, software, etc. Remember to copyright your company logo in addition to trademarking as a knock-off often includes the company logo on the knock-off products.
A formal copyright program is helpful to ensure copyrights are part of the IP protection program. Registering software makes programmers more sensitive to taking software when leaving the company. And, because a copyright is required to be registered to initiate a copyright lawsuit, you may as well timely file for statutory damages. For software registrations, be sure to file the software with redactions to show that trade secrets are in the software, thereby supporting later trade secret enforcement.
Trade Secrets: Time to Grant: Instant
For software and life science technologies, it is recommended to have a formal trade secret program in place that documents the actual trade secret and to maintain formal protection for the trade secrets. The court will want to know (i) what is the trade secret, and (ii) how did you protect the trade secret.
Marketing: When marketing the product, be sure to mark your product with appropriate IP identifiers, such as “Patent Pending,” patent number once granted (e.g., “U.S. Pat. 10,123,456”), proper trademark symbol (e.g., ™ or ®), and/or copyright notice (e.g., “© company name. Year. All rights reserved”). Marking the product and packaging will at least make your competitors think twice about producing a knock-off or similar product. Remember to remove the patent marking when patent expires. The ® can only be used for those trademarks that have actually registered.
Practical Information
Intellectual property has different value and infringement standards for product protection. Utility patents protect structure and function of an invention. Design patents protect ornamental features. Trademarks protect a name, symbol, or combination thereof that operates as source identifiers. Copyrights protect an artistic expression or work on a tangible media. As an example, a pair of jeans that has a unique shape, functional features, and logo stitching on rear pockets, for example, can be protected with the following intellectual property:
- utility patent (unique shape, functional features, methods of manufacturing) [instant value when granted]
- design patent (unique shape, logo stitching) [instant value when granted]
- trademark (logo stitching, brand name) [value grows through actual use in commerce for both registered and common law]]
- copyright (logo stitching) [instant value when granted and common law]
In the event of a counterfeit or “design around” product, one or more of the IP assets may be useful in taking down a competitor. It is important to work with the proper intellectual property attorney(s) in forging a strategy prior to and after infringement or design-around occurs to help improve coverage, as needed.
Intellectual Property War Story in the Fashion Industry
Years ago a very high-end jeans manufacturer launched jeans with a very creative stitching design on the rear pockets. Within 3 months, the jeans that were having fantastic sales started to be knocked off. The knockoffs came from many sources, mainly Asia, but also from a well-known designer in New York. At the time the knockoffs came, the design patent had not yet issued (expediting design applications was not yet possible) and the trademark (and trade dress) of the design had only been out for a few months. There was a common law copyright, but a registered copyright was needed to file a complaint. Expediting copyrights is possible so a registered copyright can happen within 10 days in certain circumstances.
The discussions against the competitors at the start were a bit challenging due to the design patent not yet being granted and the trademark not yet having significant strength. As a result, a copyright was filed with an expedited examination request. The complaint was amended with the registered copyright. Discussions went much smoother thereafter and full-blown litigation was avoided while competitor products were removed from retail stores and websites, and sufficient damages were collected. This example of using all available IP tools to protect a market in the fashion industry shows how proper IP strategy is important to protect a company’s investments and future revenue streams.
Conclusion
Because of the speed of competition with consumer products, especially with regard to fashion and beauty products, intellectual property assets need to be protected earlier in the product life cycle for maximum protection. As such, intellectual property should be properly integrated during product development, and each IP asset should be considered and timely filed. Patent applications should be expedited so that granted patents are available prior to competition shows up. Be sure to mark your product with the proper IP identifiers to help reduce competitors and maximize damages and leverage to remove infringing products from the market.
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