Legal news and trends for Canadian in-house counsel and c-suite executives
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GLOBAL UPDATE INTELLECTUAL PROPERTY Protecting your IP assets Canada for less than 50% of the price of the authen- tic products. The CEO wants its lawyers to shut down the company making the local sales. "In these cases, I usually tell the client that fighting counter- feits like this is like fighting malaria by killing one or two mosquitoes," says Jim Holloway, a Baker & McKenzie Toronto intellectual property (IP) partner. The key challenge and opportunity, he says, is to investigate, unravel and solve the problem. Further investigation in a case like this might H reveal that the bogus parts are being made in China for about $10 each, and are being sold to and distributed by another Chinese distributor for $20. Very often, the manufacturer's assets and proceeds ere's an increasingly common development: a local computer component manufacturer learns that counterfeit copies of one of its key products are being sold in are offshore, too. Says Holloway: "If you want to solve this kind of problem, you need a broader, thoughtful plan that ultimately strikes at the coun- terfeiter and its assets in those jurisdictions where they are located. You need to go to the source. If you only stop one company from making sales, another will pop up the next day." Holloway and the aggrieved rights holder would typically develop a plan in conjunction with one or more of Baker & McKenzie's foreign offices, includ- ing its China offices which are amongst the largest of any international firm in that country, which will ideally involve identifying and closing down the manufacturer. "We have the expertise and geo- graphic scope to efficiently and seamlessly handle such an issue," says Holloway. Indeed, Asialaw ranked Baker & McKenzie as the top 2007 Intellectual Property Firm of the Year for the fourth consecutive year, just one of many inter- national accolades the firm won last year. Protecting intellectual property — the basket of trademark, copyright, patents and design — is becoming an increasingly crucial issue for com- panies, especially if they want to manufacture and/or sell abroad. "Businesses understand that this is a complicated area," says Christopher Aide, another Baker & McKenzie Toronto IP partner who has worked in the field for more than 15 years. "Companies know that fakes pose a serious threat, but many are reluctant to spend money protecting themselves until their bottom line directly suffers. But by then, it's often too late." Instead, Aide advocates a preventive IP strategy to protect what are among a firm's most valuable assets. His credo: "Register, register, register." That refers to patents to protect inventions and to trademarks, those powerful visual symbols of a product's quality and origin. Think of Apple's Apple During the past 3,000 years, piracy has moved from isolated acts on the high seas to a $450-billion global business. That amount is nearly twice the projected revenue for the federal government in 2008-09. Commonly known as counterfeiting, this modern-day version of piracy involves more than Rolexes and Gucci bags. It extends from auto parts to software and from batteries to phar- maceuticals. No product is immune and no Canadian business can be too careful, especially if considering exporting or manu- facturing abroad. In the U.S. alone, sales losses due to trademark infringement and counterfeiting are estimated at $200 billion. In Canada, the amount is about $20 billion. Still, there are measures companies can take to minimize risk and protect their investment in copyright, trademark and patent. Without a doubt, the most important step is to secure legal protec- tion through the appropriate registration procedures. But what is a single act for most firms should be one part of a pro- tective shield for everyone. "Businesses should do everything in their power to avoid problems, rather than react to them," says Jim Holloway, a Baker & McKenzie IP partner. "They must have a proactive strategy." Minimizing trademark infringement and counterfeiting Specifically, Holloway cautions clients to know with whom they are dealing, both manufacturers and distributors, when operating in cheap-labour countries. "If it seems too good to be true, it usually is," he says. "The cost of due diligence is less than dealing with a counterfeit situation after the fact." Holloway also helps his clients develop an action plan should a piracy problem arise. Such a strategy should include familiarizing customs agents with vulnerable brands, establishing a budget to fight counterfeiters and lining up local lawyers. Baker & McKenzie is well positioned to help with 3,600 lawyers in 38 countries. In China, the source of three-quarters of the world's coun- terfeit products, the award-winning firm has five offices with 300 Chinese-speaking lawyers. It has been active on the mainland for more than three decades, establishing vital personal links during that period. "In China," says Holloway, "authorities may be reluctant to help you unless you have invested time in developing a relationship. Until criminal prosecution for counterfeiting becomes more com- mon, working with various administrative authorities is critical." In other words, be prepared. 16 JUNE 2008 C ANADIAN Lawyer INHOUSE