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Carel Smit

c/o Biophile Pty Ltd

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© 2010 - 2019 by Carel Smit - Biophile Pty Ltd ACN: 617 079 259

IP CASE STUDIES

Case Study #1: How Apple Uses Protected Designs to protect its iPhone interface

Prior to 2007, design rights just weren’t that important to Apple.  Before that year, Apple had never filed more than 40 US design patents in a single calendar year.

This changed just prior to the launch of iPhone.  In 2007, Apple went berserk and filed 124 design patent applications, a four-fold increase from the year before.  It’s interesting to note that if you take a look at the originators of these designs, Steve Jobs himself was a named co-inventor on more than 60 of these design patents.

This strategy paid off big time for Apple, when Samsung started bringing out their smartphones which ran the Android system and brought them handsome leverage and profits in the eventual court battles with Samsung in 2012.

One of the key factors of Apple’s thinking was that, given that they had fewer products than some of their competitors, they would try to get as many design applications filed for their products.  In contrast, Samsung, which offers many more product models than Apple, has typically secured only a single design patent for any given product.  This means that Apple has more design patents per product offering (and thus more ammunition in a legal battle) than most, if not all of its competitors.

One of the most successful design patents that Apple wielded in its cases against Samsung contained color images of their iPhone graphical user interface (GUI).  Amazingly, of the more than $1 billion that was awarded to Apple by the trial judge, more than $725 million was due to this design patent!  Why was it important?  Well, when looking at the two phones side by side, there were many differences between the GUI of these phones.  However, the color schemes were quite similar. 

 

So although the actual content was different, the general look and feel of the color on the GUI was similar enough to, in the jury’s view, have caused consumers to be confused between the two.  This meant that Samsung was in breach of the design patent and had to pay Apple damages that were calculated as a percentage of its sales. Scary, yet awesome at the same time.

Case Study #2: Ferrari v McLaren

It all started in June 2007 when a tall, arresting, blonde woman walked into a small copy shop in Surrey, UK.  She had with her a folder containing a document of some 780 pages in length.  She asked the weary clerk behind the counter to copy the 780 pages and scan them on to two CDs, which she would pick up later in the week. 

Nothing too out of the ordinary about the request, and certainly nothing that the clerk had not been asked to do before.  Unfortunately for the mysterious blonde, the clerk was a Formula One racing fan and happened to notice that the documents he was scanning appeared to portray technical drawings, schematics, and financial data relating to Formula One cars.  Enough information, as it turned out, to design a whole car from scratch. 

What made it more remarkable, however, was that each of the drawings sported the distinctive Cavallino Rampante, or prancing horse, of the Ferrari stable.  The thing is, though, the only Formula 1 team in Surrey wasn’t Ferrari, but one of their direct competitors on the F1 circuit, McLaren. 

The clerk, though, was a Ferrari fan.  He took it upon himself to do a quick online search for the name on the customer slip – Trudy Coughlan – and realized that she was the wife of Michael Coughlan, at that time chief design of McLaren, Ferrari’s enemy on the track.  He then did a search on Ferrari’s website until he found the contact details for the company’s head of F1, Stefano Domenicali. 

The clerk typed a short email to Mr Domenicali that set the wheels in motion for the biggest scandal in motor racing history.  One in which the McLaren Formula 1 racing team was ordered to pay £100 million (more than $130 million at the time) to Ferrari in September 2007.  There were 780 pages of information, all of it stolen by Ferrari’s Nigel Stepney and handed to Coughlan earlier that week; that means it cost McLaren more than $128,000 per page.  And very nearly got Nigel Stepney sent to prison.  

Just information on paper, yet extremely valuable and powerful.

Case Study #3: Uniloc v Microsoft

 

If big companies struggle with Intellectual Property, what chance does the smaller guy have?  Well, recent developments and growth in the IP industry represent an enormous opportunity for smaller players if they follow the key steps that form the basis of my strategy consulting. 

 

When you’re starting up, you don’t need hundreds of patents or trademarks and you certainly can’t afford them either.  But if you need to engage funders, investors, business partners, co-developers, or distributors, then having your intangible assets (your ideas, schemes, contacts, business methods, supplier lists) concretized in certain forms of formalized IP rights is much better than nothing and will give you a significant advantage over other players in your field.  Building a small, focused portfolio in which your intangible assets are formalized, captured and protected is always better than having them floating around in a big lather of uncertainty over whether you actually own the idea, brand, name, invention, database, or other information that you have created and need to share with potential partners.  Or being sued because you didn’t take the time to see whether your idea may have been the subject of someone else’s Intellectual Property rights. 

Having a legal monopoly providing you with an entitlement to a field of technology is the best possible form of leverage you can have and can be a near-insurmountable barrier to entry against competitors.  There are few more efficient barriers to entry than a 20-year patent monopoly for a key piece of technology or a perpetually renewable trademark for a killer brand.

If you want an example of how a small operator with a single patent took on the world and won, look no further than a fellow from New Zealand named Ric Richardson.  Ric is a computer genius who developed a rather handy piece of software which related to computer security.  Ric’s company, Uniloc, had filed a patent to protect the way his software worked (not the software code itself, as that is protected automatically by way of copyright. But I’m getting ahead of myself here).  Ric happened to show his idea to the guys at Microsoft in the early 2000s, but they indicated that they weren’t interested.  Ric left his meeting with Microsoft feeling somewhat defeated but was surprised when, a few years later, a version of his idea appeared in a Microsoft product. 

Ric flew into action and tried to contact Microsoft repeatedly, but was ignored.  Microsoft knows that patent litigation is expensive and that it would cost Ric a fortune just to get to the stage of filing a court action against them – like so many other hopeful patentees, he would most likely just go away. 

However, Ric believed in his case and enlisted the help of a new player in the Intellectual Property field – an IP litigation funder.  These IP intermediaries are companies that review the strength of your patent, review the likelihood of patent infringement taking place and the size of the potential market, and then develop a litigation strategy, pay for, and manage all your patent litigation.  They funded all of Ric’s litigation expenses, lined up Intellectual Property lawyers to fight the battle on his behalf in the US, and took action against Microsoft. 

Ric won the case convincingly, and a jury ordered Microsoft to pay him $388 million in 2006.  That’s a lot of money by anyone’s reckoning.

But it’s worth mentioning that Ric would have gotten nothing if he hadn’t taken the step of protecting the parts of his idea that he believed were patentable. 

Microsoft appealed the case, but shortly before judgment in the appeal settled with Rich for an undisclosed amount, widely rumored to be in the multiple hundreds of millions of dollars.  None of this cost Ric a cent (apart from his earlier costs of filing the patent at the US Patent Office), and he split the spoils with his lawyers and litigation funders in terms of a funding agreement they had reached amongst themselves.  By most estimates, Ric most likely got in the order of $100 million for an initial outlay of $10,000 to $20,000 and was completely de-risked during the whole process. 

The case of Ric Richardson and his company Uniloc is not unique as more and more small players discover the explosive value of their intellectual property and the novel ways in which they can be leveraged in this day and age.  The small guy no longer needs to fight alone.  There’s a whole new cast of characters out there that can help startups not only identify and protect their Intellectual Property, but also monetize it in ways that weren’t available to them just a few years ago.

Case Study #4: Nando's

In 1987, Fernando (“Nando”) Duarte and his friend Robert Brozin bought a small shop in Johannesburg called Chickenland and changed it to start selling their own style of Portuguese/Mozambican style chicken.  They renamed the shop “Nando’s”, and due to their good quality and amazing taste, it has now expanded to a chain with over 1,000 outlets across Africa, Australia, Canada, Egypt, Israel, Malaysia, Saudi Arabia, and the United Kingdom.  They have developed a massive reputation for their peri-peri chicken and have built up a lot of goodwill in its Nando’s name.  Importantly, the realized the value of the Nando’s name early on and protected it by way of extensive trade mark filings.  It now owns an extensive international portfolio of registered trademarks surrounding the word ‘Nando’s’.

 

Their name and their global expansion plans were threated in the last 1990s, when a cybersquatter had registered nandos.com and nandoschicken.com before they had.  In March 2000, Nando’s filed a cybersquatting case with the WIPO Arbitration and Mediation Center under the Uniform Dispute Resolution Policy (UDRP), based on their trade mark registration. 

 

The panel hearing the case found in favor of Nando’s and ordered the respondent to transfer the domain names to the company.  That is the power of having a trademark for your brand – you can stop other from misusing your brand, cybersquatting, or diluting the value of your brand.  This is because a trade mark gives you the monopoly over the word and you can thus stop others from using it, even in the form of a domain name, if you had file a trade mark early enough.