GOVERNMENT GRANTS & INCENTIVES TO POWER UP YOUR BUSINESS
FREEDOM TO OPERATE SEARCHES
The impact of BREXIT on UK & European Patents
Parallel importing changes coming PIONEER PODCAST Putting the power back in the hands of consumers with Shaun Sumaru
CEO MESSAGE I ’m thrilled to share the latest
REBECCA HEMBLING Marketing & Business Development Manager email@example.com
JESSICA LAVILLE Business Development Consultant firstname.lastname@example.org LOUISA TAYLOR-BOND Graphic Designer, Reflect Design email@example.com
Slightly further afield, one of our senior patent attorneys, Phil Burns, asks what Brexit will mean for patent protection in Europe? Phil delves into the consequences of the UK’s possible withdrawal from the European Union from an intellectual property standpoint – specifically looking at the positive and negative impact of Brexit on patents, and their patent-holders, currently operating in Europe. This edition also includes a wonderful contribution from our friends at PwC who, through their Nifty Grants program, provide some fantastic tricks and tips for Australian startups and small businesses to help with finding, applying and complying with government grants and incentive programs. Regardless of your business-model, I encourage you to turn to their contribution to this edition of the Gatherer – Government Grants & Incentives to Power up your Business. Pioneer, our podcast series for serious innovators, continues to play a strong role in connecting industry with the minds of some of industry’s finest. In this edition, we bring you a transcript of my recent interview with Shaun Sumaru, Founder of CARDEALS2ME, who transitioned from car dealer and dealership owner to the challenging and exciting life as an entrepreneur. I encourage you to turn to this publication, or download the podcast from our website, for an illuminating and enjoyable insight into how technology can shake up a very traditional industry.
Finally, with the rapid evolution of technology that is unfolding before us, it was inevitable that computerised products would be developed to support and enable products and processes in the financial sector. Unfortunately, from a patenting perspective however, finding new and inventive aspects to these products so that the creators can protect their intellectual property is incredibly difficult. Ryan Boe identifies the difficulties facing entrepreneurs seeking patents for tech products in the financial sector. With so much happening in the intellectual property landscape, I hope that this publication brings to light some of the exciting trends we’re observing – or that you’ve discovered something new. As always, if you’d like to be part of our Pioneer series or contribute content or ideas for future editions of The Gatherer, please contact a member of our editorial team – they’d love to hear from you.
edition of the Gatherer with you – our regular flagship publication developed by our thought leaders especially for our clients. The Gatherer seeks to provide you with the most relevant insights and news into the ever-changing intellectual property landscape, both here in Australia and across the globe. In this edition, we bring you insights, perspectives and information across a range of topics spanning the intellectual property landscape written by our technical experts, covering proposed legislative changes, the ramifications of Brexit in the UK and the strategic significance of freedom to operate searches (FTOs). An FTO is an extremely useful, and yet chronically underutilised, tool for gathering information – bearing a strong resemblance to a reconnaissance mission! Andrew Mullane explains that, when effectively used, an FTO not only enables you to scope the field of competitor development, but it can also provide guidance on where to direct your own R&D work and help you to anticipate – and hopefully avoid! – problems down the track.
Message from our CEO
RYAN BOE Senior Associate firstname.lastname@example.org PHIL BURNS Senior Associate email@example.com ALBERT FERRALORO Principal firstname.lastname@example.org TIM FRANCIS Principal email@example.com CHRIS JUHASZ Principal firstname.lastname@example.org ANDREW MULLANE Senior Associate email@example.com ROBERT PIERCE CEO firstname.lastname@example.org Guest Contributor BRENDAN WHITE Senior Grants Incentives Specialist at PwCs Nifty Grants email@example.com
In the spotlight with Albert Ferraloro
Parallel imports – changes coming
10 Government grants & incentives to power up your business 12 Freedom to operate searches 16 Flogging a dead horse – Fintech Patenting 18 PIONEER: Putting the power back 24 The IP Perspective with Chris Juhasz 26 The impact of BREXIT on UK & European patents 31 WHAT’S ON: Calendar of Events 2018
ROBERT PIERCE CEO T +61 8 9216 5115 firstname.lastname@example.org
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IN THE SPOTLIGHT WITH ALBERT FERRALORO
A lbert Ferraloro is one of our most experienced practitioners, frequently assisting clients with the management of, and strategic considerations around, commercialisation of their IP assets. With both private practice and in-house experience, Albert works with a wide range of clients across many different industries – from start-ups and SMEs, through to large, established companies who are leaders in their field – providing practical guidance and legal advice in relation to the management and protection of intellectual property. Q: Tell us about the greatest challenges you see being faced in today’s environment as your clients are striving to achieve market share and scalability with their innovations A: Identifying or recognising those key customer/business opportunities that come along from time to time is one part of the challenge, but so too is being able to react and deliver when an opportunity does present, as often those two things do not align as you’d like them to. Things like timing, connections, and even luck, can have a significant bearing on business success, but being able to recognise an existing problem or need and being
positioned to offer a unique solution is more likely to lead to traction in the market and business security than developing a product or offering and then trying to find a home for it. Managing business growth and the rate of expansion, both in terms of keeping up with or ahead of the game with the particular product or service offerings that are the focus of the business, but also in terms of other operational issues, can also prove very challenging. Operational issues that require to be addressed as a business seeks to step up to a next level can come in all shapes and sizes depending on the commercial aims of the business. Some key issues include bringing together the right leadership team to successfully take the business forward, sourcing and securing funding to support growth plans (and of course continuing to manage cash flow), and finding the right people to join the team when scaling the business, both in terms of technical ability and good cultural fit for the organisation. Other business issues that need to considered and managed can be around targeted BD and marketing endeavours, building strategic relationships with partners, suppliers, distributors and the like, and also of course in terms of recognising and managing IP issues and safeguarding the organisation’s valuable IP assets. Q: What are some of the key considerations you see from an IP perspective that people should be thinking about when taking their
innovation to market? A: Considering protection options at the right time is very important. With certain protection options if this is done in the wrong order, opportunities to secure exclusive rights or the like can be significantly compromised or even lost. Proper consideration of protection options is also premised on being able to identify, capture and suitably evaluate new innovations and solutions as they are developed within a business. Being able to leverage or reflect value in the IP assets within a business necessitates that those IP assets are understood, suitably safeguarded and managed. IP rights also need to be thought of more broadly than just a tool which can be used to sue someone who may be doing something similar in the market. IP rights can indeed be asserted against infringers in certain circumstances, but they can also be used in other ways to support commercial aims, including in respect of simply keeping competitors at bay, attracting business and potential collaborative partners, supporting capital raising activities, and providing opportunities to realise other revenue streams in the form of licensing and royalty based income. Careful consideration also requires to be given in respect of freedom to operate (FTO) issues. Protecting and leveraging your own IP assets is certainly important, but very often, as or more important is understanding what third party IP rights exist in
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“ it is not what you know but who you know ”
Being able to establish key connections and leveraging existing relationships is often the difference between doors being opened for you and being turned away. Whilst there is some truth to the old adage “it is not what you know but who you know”, many of the individuals I have seen go on to be successful with their endeavours have been very proactive in building their networks, getting introductions to key contacts and companies, and also harnessing the knowledge amongst their peers and within their network to assist with preliminary filtering of supposed ‘opportunities or connections’ which come across their radar. The other notable trait which stands out for me is a willingness to take action or try things irrespective of the unknown. The fear of failure is very often the reason why opportunities are not seized or certain products fail to see the light of day. In other countries business and commercial failures are often seen as a badge of honour or necessary scars you have to have before you can be successful. Whilst it may not be quite the same here in Australia (yet), what is evident is that those willing to have a go and take action are more often the ones that will have an intriguing success story to talk about, whilst those that keep developing and improving their tech and waiting for the perfect time sometimes just fade away into obscurity.
For many businesses, IP also often represents the greatest proportion of overall asset value, so in the same way that owners take steps to safeguard their other valuable business assets (e.g. plant, premises, stock, human capital etc), they should equally be considering what measures they have in place to safeguard their valuable IP assets.
Q: You’ve been in the role of National President of LESANZ for 12 months now and recently returned from San Diego where you attended the LES International Annual Conference. In your opinion, why do we place such strategic importance on the early identification and protection of client’s IP rights? A: In simple terms, IP protection and IP management is all about risk minimisation and maximising opportunities for business success. Being apathetic towards IP can result in business and revenue opportunities not being realised, and organisations being exposed to commercial risks and challenges which could have been avoided. from shelves because IP landscape knowledge or FTO issues weren’t considered is not the sort of thing you want to hear as a director, manager or business owner. Equally, learning that something your organisation developed could have been protected and provided you with a sustainable competitive advantage, or worse, is now being used by a competitor to the detriment of your business, all because you failed to consider certain IP issues at the right time would distress the most hardy of business managers. IP is obviously only one of numerous things that can determine business success or failure, but the adoption of some simple IP management principles and practices can at least help businesses ensure that they are well positioned to make the most of their creative endeavours. Being told you have to cease production or remove products
In Western Australia, the Ignition program delivered annually by Curtin University (now in its 8th year) and the Concept to Creation course now being delivered by CERI (The Centre for Entrepreneurial Research and Innovation) are two great courses that I have been fortunate enough to be involved with and which I have no hesitation in recommending to business owners and budding entrepreneurs alike. The Start Something program is another successful local initiative that seeks to encourage entrepreneurship and research commercialisation within university environments. In terms of courses that more specifically focus on IP licensing and understanding/extracting value from IP assets, LESANZ (the Licensing Executives Society of Australia and New Zealand) has numerous courses and workshops which focus on these areas that are regularly offered throughout Australia (and New Zealand). There are various levels and modules within these Intellectual Asset Management (IAM) courses which enable them to be tailored to a certain extent for specific organisations or professional groups seeking to upskill their members or employees in respect of IP and IP commercialisation endeavours.
It would also be remiss of me not to mention the many award programs that are available in the innovation space, some of which include mentoring and other advisory sessions which themselves can prove very valuable to applicants (i.e. over and above any awards which are also earned). The WA Innovator of the Year (IOTY) program, of which Wrays has been a strong supporter of for many years now, is one such award program we regularly recommend to our clients in the start-up and emerging business space. Q: We hear about the importance of grit and determination needed by start-ups, entrepreneurs and SME’s to not only survive, but to thrive. What are some of the common success factors or personality traits that you see as critical in those that you work with? A: There are several notable success factors and personality traits you see over and over in the innovation space, but one that stands out for me more and more is the ability to develop and harness the value of a strong business network.
your technology space and what restrictions or roadblocks these may place on your own technical and commercial activities. The ability to protect your own innovations and solutions (e.g. by way of patents, design registrations or other protection mechanisms) does not in itself guarantee your ability to market or use you products, and it is important that business managers and owners understand this important distinction. course also help inform technical and business activities in terms of avoiding reinventing the wheel, guiding R&D activities, and with the identification of potential customers, competitors and collaboration opportunities. Q: I know you’re knee deep in the innovation ecosystem. What are some of the programs you recommend for those seeking to learn more in order to take their programs and courses out there that can help individuals or teams build new skills and learn from the experiences of seasoned campaigners which can prove invaluable when businesses are seeking to progress to a next level. Understanding the IP landscape as it applies to your area can of business to the next level? A: There are numerous good
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PARALLEL IMPORTS CHANGES COMING
There is a bill currently before Parliament that is designed to clarify whether a person can import trade marked goods without infringing the local Australian trade mark registration. Its goal is to facilitate more parallel importation of legitimately branded goods into Australia, in order to increase local competition and benefit Australian consumers.
Where a trade mark has been applied to imported infringing goods by, or with the consent of, the owner of the Australian trade mark, a legal defence to infringement already exists. However, this defence requires the importer to prove that such consent has been given. In cases where goods change hands through a number of intermediaries before being imported to Australia, this defence can present difficulties for the alleged infringer. Readers may recall a crop of ‘Paul’s Warehouse’ cases, where non-counterfeited apparel was imported into Australia. Paul’s Warehouse was unable to prove that the Australian owner had consented to the application of the marks on those goods – and so was found to have imported infringing goods. Similar issues have thwarted importation of genuine printer toner units into Australia. Sometimes contractual arrangements between overseas sellers and their buyers can prohibit selling into or outside of certain markets, which again makes proving consent difficult. The proposed new laws provide that infringement will not occur if, following reasonable inquiries, a reasonable person would conclude that the trade mark was applied to the goods by, or with the consent of, a person who was: –– the owner, or licensee, of the trade mark –– a person with significant influence over the use of the trade mark by the registered owner or an authorised user, or –– an associated entity (within the
This effectively means that a great many companies within a corporate group will be deemed to be associated entities of the trade mark owner. And, if an associated overseas entity of the Australian trade mark registration owner uses the mark on goods overseas, those goods could be imported into Australia without infringing the Australian trade mark registration. This may have a deleterious effect on the businesses of local authorised distributors, although there may remain some scope for trade mark owners to prevent such importation through avenues such as the Consumer Law or the tort of passing off. The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018 is still under consideration by Parliament, so it is not certain that it will become law. In the meantime however, importers need to carefully consider the provenance of imported goods in order to avoid infringing local trade marks.
TIM FRANCIS Principal
meaning of the Corporations Act 2001 ) of one of the above people.
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GOVERNMENT GRANTS & INCENTIVES TO POWER UP YOUR BUSINESS
in the high tech sector, with $14.5 million in funding, including $4.5 million specifically allocated to drive innovation in the regions. Read more here. South Australian Early Commercialisation Fund (SA) The SAECF is a competitive grant program established by the South Australian Government to assist SA technology companies, university research, commercialisation organisations and entrepreneurs to commercialise their intellectual property. Expression of Interest are open now, see here. As you can see, there are a range of programs at both federal and state level. If you’d like more information, the government sites linked above are a great starting point. For local grant opportunities please visit your local council’s website. To make the process of applying for the R&D Tax Incentive, the Export Market Development Grant, or obtaining an ATO private ruling for your ESIC status, visit Nifty Grants by PwC. About the author Brendan White is a Senior Grants & Incentives Specialists at Nifty Grants. Brendan has a software development and engineering background and joined PwC’s incentives and innovation team six years ago. Nifty Grants, built and backed by PwC, makes accessing federal government grant and incentive programs simple and affordable for emerging companies niftygrants.com.au
now here. State Based Program Overview
commercial potential. Support includes up to $50,000 in matched funding to work on collaborative projects with the research sector. Applications for this grant must be submitted within 12 months of receiving an Innovation Facilitation Report. Learn more here. Tax Incentives for Investors (ESIC) To encourage investment in high risk, early stage ventures, a generous tax incentive is available to investors who invest in ‘Early Stage Innovation Companies’ (ESICs). This incentive provides a 20% carry forward tax offset and a 10 year capital gains tax exemption for investors. There are no specific deadlines, however for the investor to be eligible, they must be investing in a company with ESIC status. This is a self assessed status which should be re-assessed on a annual basis. See further detail here. Export Market Development Grant Supporting the growth of Australian companies into overseas markets - eligible companies who are spending a minimum of $15,000 on overseas marketing, can claim up to 50% of these costs back. This program can be claimed annually from 1 July each year. See Austrade for more detail here. Landing Pads Also to support Australian companies expanding overseas - and while not technically a grant, Landing Pads provide market-ready Australian startups and scale ups with access to some of the world’s most renowned hubs including San Francisco, Tel Aviv, Shanghai, Berlin and Singapore. This program has three cohorts each year, which all have seperate application deadlines. See more detail and apply
State based programs are also important to be across. Here’s a snapshot of some popular and upcoming programs available at the time of publishing: Minimum Viable Product (NSW) Supporting NSW based early stage companies developing proof of concept ideas, this grant offers funding of up to $25,000 to progress their proof of concept and test their business model with consumers. Applications are open all year round, see more detail here. Launch Vic (VIC) Aimed at ecosystem capacity building rather than direct investment, LaunchVic works in partnership with entrepreneurs, industry, business, the community and educational institutions to strengthen Victoria’s entrepreneurial and startup ecosystem. Grants vary and application rounds open throughout the year, learn more here. Business Development Fund (QLD) Queensland based companies at the forefront of commercialising cutting edge research or innovation who are seeking seed or follow-on funding have an opportunity to access between $125,000 and $2.5 million of funding. Applications can be submitted now, see more info here. New Industries Fund (WA) For Western Australian based high tech emerging companies and regional innovation, the WA state government has recently created a “New Industries Fund” to offer grants to new and emerging businesses
and technologies with an unknown outcome. Eligible claimants can obtain up to 43.5%* of their research and development costs as a refund or tax benefit for each year they complete eligible R&D work. This program must be claimed in a 10 month window following the company’s financial year end. Learn more here. *the FY19 budget proposes to change the benefit for small companies to 41% for FY19 R&D claims onwards. Entrepreneurs Programme (including Accelerating Commercialisation Grants) This program supports a range of early stage companies needs and consists of; specific industry business advice; co-funded grants to commercialise novel intellectual property; funding opportunities. Each element of this program has a different application process and timeline, more here. Innovation Connections (a subset of the Entrepreneur’s Programme) This program provides small and medium sized businesses with access to expert technology advice and development of new ideas with to take advantage of growth opportunities; and collaboration
programs and more. Differentiating between programs, eligibility and how to apply can be overwhelming and while you don’t want to miss out, it is equally as important to make sure you fully understand your compliance and substantiation obligations or connect with an advisor who does. In the context of all possible sources of funding, government grants are a popular source that, if accessed properly, can reduce or limit the need to raise capital or seek support from outside investors. As they’re non- dilutionary, business owners are able to retaining ownership and control of their business - which is often extremely important. Federal Government Program Overview As mentioned above, federal government programs are usually the most stable and are the least likely to change. Here we have created a shortlist of some of the most popular programs available to early stage companies. Research and Development Tax Incentive This program is available to businesses experimenting with new products
Government Grant & Incentives to Power Up Your Business For early stage companies, a government grant or tax offset can sometimes be the difference between keeping the lights on or shutting down. This may sound dramatic, but for some emerging companies without full investment funding, this is a reality. It is therefore important to stay informed and avoid missing out on funds you may be entitled to. In Australia, competition for the tax revenue that funds these schemes exists at the federal, state and local council levels which result in a constantly changing set of grant programs that start and stop depending on the priorities of the current government. As a rule, federal grant programs change less than state and local programs, but as an early stage company, keeping abreast of changes and new programs is worthwhile to be able to utilise the incentives programs to your advantage. Sources of grant funding Funding can come from a range of sources, including government grants, venture capital, accelerators, education
Nifty Grants Powered by PwC
To help you decide what to do, there are a number of questions you should ask yourself – such as: –– How similar to the project is the patent? What is the infringement risk? –– How existential is the threat? Does it go to the core of the project, or can steps be taken later on to work around it? –– How flexible or unpredictable is the project? Could the issues resolve themselves as the project proceeds organically? –– Can the project easily steer clear of the patent, even if it’s legally unnecessary? This might be cheaper than taking other action. –– How strong is the patent? Are there any invalidity issues? –– Who owns the patent? What’s your relationship and experience with them? What’s their business model? –– What is your potential market worth?
FREEDOM TO OPERATE SEARCHES
A strong knowledge base can give you a real edge over the competition, but are you taking advantage of all the available information streams? Freedom to operate searches are an extremely useful, yet chronically underutilised, tool for gathering information. FTOs are like reconnaissance missions, allowing you to scope the field of development and your competitors. Used effectively, they provide guidance on where to direct your R&D work – and can help you anticipate and avoid problems well in advance. A small investment in an FTO at the beginning of a project can make an enormous improvement to the return you see on your R&D budget. Freedom to operate searches An FTO is a literature search of published patents and applications, and is conducted using keywords. You can search broadly for inventions within a field of technology or that do a certain thing, or narrowly for inventions that function a particular way. You can also search for Australian patents, patents in selected countries or worldwide. Conducting an FTO is an excellent way to identify development opportunities that your business can target. An FTO will identify any published patents and applications for inventions matching your keywords. These results will give you a good picture of the patent landscape. You may find gaps in that landscape – needs that the existing patents don’t adequately address
or new ways of providing existing services that will best the competition. These gaps represent development opportunities that you might be able to exploit. You may find fledgling ideas in patents that you can build upon. You might find patents you can purchase and commercialise, or use as a base for further R&D work. Sometimes inventions are protected in some, but not all, countries. Let’s say an invention is protected in Europe, but not in Australia. You’re free to commercialise that invention in Australia. If the Australian market is negligible, you could conduct in Australia all the development work needed to bring the invention to market, including real world trials, so you can launch a perfected product in Europe as soon as those patent rights expire, getting a jump on the competition. FTOs provide an insight into what competitors are working on. This can provide you with helpful intel on their upcoming products and allow you to anticipate, and make early moves to combat, their latest innovations. Finally, FTOs allow you to anticipate and avoid disputes by determining whether something is already protected. There’s more on what you can do if you identify a problematic patent in the next section. Ideally, FTOs should be conducted before beginning a project. From the outset, the FTO should be part of the matrix of information you draw upon to tailor your strategy. There’s nothing worse than spending valuable time and money developing an idea only to find out that it will be launched into a thicket of products and patents, and that you’ve missed a more promising area for investment.
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Conducting an FTO is an excel lent way to identify development opportunities that your business can target.
patentee will often be aggravated and paying legal fees. You should also re- evaluate your strategy over time – as circumstances change, you might find your strategy requires adjustment. Deal versus Litigation If your heart is set on a project and you can’t find a viable workaround, and don’t want to take the risk of being shut down in a subsequent legal challenge, you’ll need to decide whether to approach the patentee for a deal or to take legal action. Deals have a number of advantages over litigation. First, there is fast commercial certainty. Many deals can be hammered out in a day. Litigation can take years to complete, and you won’t know how it will end. That uncertainty can affect your business internally, as well as your external reputation and relationships. Will customers continue purchasing a product that’s being litigated? Will it affect partners’ willingness to work with you? Second, litigation can be extremely expensive and time consuming for employees. The in-house legal team and board need to keep on top of all developments, technical employees may need to assist with evidence, and discovery is a nightmare for everyone. Third, the remedies available at the end of litigation are limited. A deal is limited only by the parties’ imagination and capacity to agree – you can extract more value from a creative deal than a win in court.
Do a deal A deal could be anything you can imagine but it usually involves some sort of licence to, or assignment of, the patent. A licence gives you permission to use the invention, while an assignment means you now own it. Which of the two options is more advantageous will depend on the circumstances. Deals don’t always involve money changing hands. Patents are difficult to value, which gives you flexibility in what you bring to the table. Tech- transfers or cross-licensing, where both parties license technologies to the other, is common. Your IP might make the invention better. The patentee might need your expertise to get the invention to market or improve it. You might also be able to help them with something completely different. Deals tend to be cheaper where you haven’t already begun using the invention. This is because you’re free to walk away and do something else. You’re like a customer – which is a much stronger bargaining position. If you have infringed, you require a licence to avoid litigation. The patentee has you over a barrel and the licence fee could be higher. This is one reason why it’s important to recognise problematic patents early.
Do it anyway Ignoring problems usually makes things worse, but sometimes it’s an appropriate strategy. The project could drift away from the patent organically. There may be a very low chance of the patentee raising the issue, either because they have no appetite for litigation or they’ll never find out you’re infringing. Maybe you’ll get sued, but it could be better if the project is up and running and contributing to your cash flow – a successful project could fund the litigation. Or maybe you’re just willing to leave open the possibility that the patentee will leave you alone, rather than commence proceedings and infringement, and succeeds, you may be forced to withdraw your product from the market and pay the patentee compensation for any sales you made in the meantime. So, if you do decide to run the risk of future legal action, just remember to start putting contingencies in place now, so you can minimise the damage if the worst- case scenario plays out. Do you slowly There’s often no advantage to proactively challenging a patent unless you need to know whether you’ll infringe it before launching your product. As challenges are generally defensive in nature, it’s usually better to see if the patentee takes action against you (though there are exceptions). definitely end up in court now. If the patentee does sue you for
What to do if you find a relevant patent If your FTO identifies a patent that might get in the way of your plans, you have a number of strategies available. You might: –– Do something different – take steps to work around the patent –– Do a deal – negotiate with the patentee –– Do it anyway – proceed with the project and deal with any legal issues later –– Do you slowly (aka Paul Keating) challenge the patent rights, or –– Do something else – shut down the project altogether. Do something different A workaround is often the most cost effective way to avoid a dispute. A workaround can be as simple as using a different part, or doing things in a different order. A workaround needs to make both commercial and legal sense. So, find out how much the workaround will cost (to identify, develop and implement), and whether the market will accept a product without the patented feature. You should also ask how much it improves your legal position. There is a big difference between modifications that clearly – versus arguably – avoid a patent. While having a non- infringement argument is of course better than having no argument, it may not be enough to keep you out of court – or bring you legal success.
Fourth, where litigation has winners and losers, a deal often lets both
There are many litigation options available – and each has its advantages and disadvantages. The decisions you make early on are critical to your ultimate success, so you need to be strategic from the very beginning. For example, opposing a patent application before it’s granted is cheaper than court proceedings. Asking the patent office to re-examine a granted patent is cheaper still. However, actions such as these will give the patentee the opportunity to amend their patent to overcome your arguments and you may suddenly find you’ve lost your best defence. You might prefer court because you’re concerned about amendments, or because your case relies heavily on expert evidence. Shutting the project down Sometimes your best option is just to shut the project down entirely, and focus your time and money These strategies are not mutually exclusive. For example, there’s merit in investigating a workaround and seeking a deal – if you do identify a workaround, the deal may become a lot cheaper. It may be worth litigating and negotiating. It can get you a better deal, since the patentee is facing a serious threat. It may make the deal worse or impossible, since the somewhere more lucrative. Combining Strategies
parties walk away better off. And finally, deals are usually
confidential – which means that your competitors need not know anything about it, while litigation is conducted in public. Conclusion FTOs are an excellent tool for identifying promising development opportunities, gathering intel on the competition and identifying IP risks. If you do identify a problematic patent, there are numerous approaches available to you. You can turn the situation into a chance to do a deal with the patentee that benefits all parties, innovate around the roadblock, stay the course while putting contingencies in place to minimise the risk to your business, start a legal challenge or simply move on to greener pastures. Evaluating all of the circumstances, and taking a creative, commercial approach will allow you to identify your best strategy.
ANDREW MULLANE Senior Associate
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However, without these, there was no new and patentable technical contribution. Take Away If you have a new way to implement a financial process or system, in most instances, it doesn’t matter how much money your process or system can make or how good your process or system is from a patentability perspective. It remains a process or system and therefore is not considered patentable. If you want the monopoly benefits of a patent, your financial process or system needs to have a new technological element that is itself patentable. This may sound daunting, but the difference between a patent application in this space being considered patentable or not can come down to the way in which the new process or system is framed in the application. With this in mind, the guidance and assistance of a relevantly skilled patent attorney can be the difference between patentability and rejection. This relevantly skilled patent attorney knows the system and can frame your process or system in terms of technological implementation to give you the best chance of obtaining patent protection.
When we look at the above noted financial processes or systems applied to a computer, there must be a technological improvement in the way the computer operates. In other words, making a financial process or system more efficient or cost effective is an improvement to a non-patentable scheme or plan, but it is not considered a patentable technological improvement. There is further case law in Australia that gives some guidance on what may or may not be considered patentable in this area. Example An applicant filed a Fintech patent application related to investing in securities and creating and using passive portfolios and indexes. The invention layered algorithms to enable the computer to interpret data and index a securities market. This has not been done on a computer before, previously requiring significant human input. It was held that the invention merely used a computer as computers are commonly used to implement a scheme that has typically been conducted by an analyst. The question to ask here is, where scheme happen? The answer is that there was no new and patentable technical contribution. If the invention had created new ways to index the securities data that were foreign to a computer, then it may have been considered patentable. Similarly, if the invention had created new efficiencies or pathways in the computer structure for indexing securities, the invention may have been considered patentable. is the technical contribution to computing needed to make this
There is a further requirement that to be patentable, something needs to be an artificially created state of affairs in the field of economic endeavour – and that must involve a physical phenomenon or transformation. In a computer, the electrical signals used to operate the computer are a physical phenomenon or transformation. This may lead you to think that any financial product utilising a process or system applied to a computer would be considered patentable subject matter as there is a physical phenomenon or transformation taking place in the computer, but this is not the case. There is case law that sets out the requirements for an invention to be considered patentable in the realm of computer implemented inventions. It specifies that the invention must meet at least one of the following requirements: –– The contribution of the invention must be technical in nature. –– The invention must solve a technical problem within the computer. –– The invention requires more than just generic computer implementation. –– The computer must add something more than just being an intermediary tool. –– The ingenuity of the invention must not solely relate to the scheme. Basically, there must be something patentable in the way the computer itself is being used, not just being used as a tool.
FLOGGING A DEAD HORSE – FINTECH PATENTING.
T he Australian financial economy. New ways to legally organise, distribute, invest and hide funds so that profits are maximised, whilst minimising taxation and associated risks, has been popular since people started using coinage and other symbolic value representations for trade. sector is the single largest contributor to the national
With so much money in the financial sector – and with the rapidly evolving technology we see developing before us – it was inevitable that computerised products would be developed to support and enable financial products and processes to supplant the people that performed these financial jobs previously. These computerised products and processes eliminate human error, are ready and willing to act around the clock, and do not require a wage or other employment benefits. These financial products and processes have not been possible before due to the technology not previously being up to the task. Now that they are possible, the developers of these products and processes have looked to intellectual property protection to restrict competition and maximise profits that can be realised. As they are typically offering a product or process, patenting tends to be the area looked to for intellectual property protection.
Unfortunately, from a patenting perspective, the fact that this non- productive element of the economy has been around for so long, and has such a large value, makes finding new and inventive aspects to it difficult. Relevant Patent Framework Whilst the rules in different countries are slightly different, in order to patent something it must be considered to consist of patentable subject matter. In Australia, the following have generally been held to be outside the field of patentable subject matter: –– discoveries without a means to implement them
RYAN BOE Senior Associate
–– mere ideas –– mere plans
–– scientific theories, and –– mathematical algorithms themselves.
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PUTTING THE POWER BACK!
In our recent Pioneer podcast interview Wrays’ CEO, Robert Pierce spoke candidly with Shaun Sumaru, Founder of CARDEALS2ME – a disruptive app that that puts the power back into the hands of the consumer helping them to get the best deal on the new car they want from local dealerships.
Shaun shares his story on his transition from car dealer and dealership owner to the challenging and exciting life as an entrepreneur – using technology to shake up a very traditional industry. “Having come from the automotive retail industry, we saw a massive gap between consumer needs and outcomes. Our platform was created to give consumers the ability to anonymously obtain the best deals on new or used cars in under two hours, empowering them to make the best purchasing decisions for free.” In 12 short months, Shaun and his team have launched their new technology to the market, growing users to more than 10,000 across Australia and New Zealand. At the time of recording, he had just returned from Tech Week in London and was about to leave for Silicon Valley to showcase the app as part of Startup Grind a global community for entrepreneurs. Ready to take this ground- breaking app to the global market, Shaun talks about the important difference between ideation and execution and the need to harness the validations along the way.
Shaun Sumaru Founder of CARDEALS2ME
www.wrays.com.au | 19
Rob: Hi Shaun, great to have you hear in the Melbourne Wrays’ office. Tell us about the app CARDEALS2ME, where on earth did you get the idea? Shaun: Thanks Rob. Well, I’m 12 years ex-automotive industry, so I essentially grew up in dealer-land – understanding the basics of selling and going through the processes. I got to a point where I was at a management level, and held part-ownership of a franchise dealership, at which stage, I still felt a little bit lost and thought there had to be a better way – especially having seen so many people struggle with the ‘buying a car’ process. So, the idea and the concept evolved out of all my experience. The CARDEALS2ME app’s quite simple. Our little tool is essentially a matchmaker service – a customer downloads the app, they specify what they want to buy (ie a better used or new car) and then those details are pumped out to the relative dealers. The consumer completely is kept anonymous at this stage. The dealers will respond with their price for a vehicle that’s suitable for that person – and in their price range if it’s a used car. They’ll come back to the customer within the time frame of a few hours. The consumer then has those details and can either choose to act on, or ignore, the information for a period of 24 hours. If the customer chooses to verify their details, they get in touch with the dealer and get a great deal on a car. Rob: You’ve covered very quickly a couple of pivots that I know you’ve encountered along the way there. So, there’s the anonymous nature of it and there’s also the used-car element. I understand that it was new cars to begin with? Shaun: Yes, 100 percent. The concept has pivoted quite a lot. We only launched the product in Australia in February 2017 and in March for New Zealand – and we quickly learned that we had a lot more consumers than we ever dreamt we would have! I think the market was looking for an alternative to the typical classified system. Classifieds are fantastic for research and looking at pretty colours and so forth, whereas ours is a tool to literally get you the best deal on a particular day. I think dealers have responded well to our system and consumers like the anonymous nature of it.
Rob: So ‘beyond your wildest dreams’ is a quote? What were your wildest dreams? Shaun: I was hoping that my Mum would download it. Rob: And did she? Shaun: No, she hasn’t! So, I’ll have to call her after this and get her to download my app to make me successful. I think when you build something, you get nervous even though you know the product, you know the industry, and you know that there might be a need for it. You do as much market testing and surveys as possible prior to launch, but until it’s on the store and someone physically has to download it [you can’t be certain if it will be successful]. We had a couple of milestones early. It’s those initial downloads – for us it was initial quote requests, dealers responding, and then someone buying a car. I think we were lucky, we had a fairly big first sale – someone went to Mercedes-AMG and received a substantial discount. She was time poor, and a business owner, so she was fantastic for us. Rob: She was a great advocate? Shaun: 100 percent. You can’t pay for people to use the app. So, to have word of mouth in the kind of circles that that business owner moves in, certainly worked well for us. Rob: It takes a brave step to jump out of a business, or an industry, that you’ve been successful in for 12 years as well. How has the app disrupted the market? Disruption is a very fashionable term at the moment –tell me, how do you think it’s disrupted the market? And what kind of penetration have you gained? Shaun: Sure. Initially, I thought it was going to be quite disruptive to the market – especially when coming up with the concept. However, we evolved that thinking during the concept phase of the application. We really tried to engage the market, as opposed to disrupting car dealers. Our product tries to help them evolve and scale up their business. I think that’s where the benefit has been – so a dealer that’s remotely, or regionally, based can have the same traffic as a Sydney dealer. And, I think that is very powerful. Rob: You’ve come at it from a really unique position. You’re solving a problem for the client, but you’re
Our app isn’t text heavy and it’s certainly a global product fit. Obviously, the North American market is huge and that’s certainly an opportunity and pathway that we’re exploring. Rob: That’s very interesting that you mention North America last. On these podcasts typically I’ll say, ’So what are your global aspirations?’ And people respond, ‘Oh, the US!’ You’ve obviously planned this out strategically and you’ve got some clear thought processes of where you’re going. Shaun: The North American market is obviously the honey pot. They have a massive vehicle appetite. I think the last number I saw was 38 million vehicles sold annually in the North American market. Rob: Wow. Shaun: When you compare that to Australia, which has a little over a million new cars sold annually, there’s a massive, massive difference.The Asian markets are also quite large and worthy of focus but at this point in time we’re concentrating on those key markets that I’ve already mentioned. Rob: Right. Shaun: The North American market is exciting. However, I believe that we need to have deep pockets to hit that region really hard with marketing and to grow exponentially across that market. Rob: So, back to the London trip. We’ve already discussed that your product captures both the consumer side and the dealer side. You mentioned manufacturers – tell me a little bit more about that. Shaun: Strategically as the world automotive retail game changes, manufacturers are more and more inclined to try and control the process. So what we’re aiming to do is work to with manufacturers to give them the ability to hit consumers as well. I think that it’s an important relationship that we’re looking to forge going forward in all markets that we play in. Ideally, the dealership landscape is enormous – and, what we do that’s different to a lot of other automotive retail-based systems is, we don’t try to recreate the infrastructure. We’re utilising structures that already exist, being the dealers, and we’ll modify and play as that evolves.
actually approaching the problem from the side of the car dealer as well. You’re hitting both sides of the fence. Shaun: I think that was important. Consumers have always disliked the car dealership process. That’s certainly no secret and an issue globally. Let’s face it, the car industry hasn’t changed that much in the way they do things for many, many years. So, as much as those sales processes need a shake up, I think all dealers are trying to look after customers better. They are trying to get rid of the stain that they’ve been tainted with for so long. But, from the consumer side of things, I think the experience is still kind of agricultural and not fluid. Rob: You mentioned an important word there, global. You obviously have global ambitions. Tell me a little bit about those and the markets that you see yourself moving into. Shaun: Certainly. So, we recently got back from what was essentially a study tour to London for London Tech Week with the Victorian Government. That was amazing. It is a much bigger market and that certainly opened up our eyes – some of the discussions we had over there were sensational, very positive. We met with dealers and some manufacturers, and were able to ask for their input on questions like whether our product was suitable for their market which was beyond the research that we had already ascertained ourselves. We found that there’s a big hunger in their market for a product like ours. So the UK is certainly a market that we’re looking at, as well as other parts of Europe and Shaun: Yes, South Africa jumps out at us for several reasons. They’re fluent in English, which is obviously helpful, but the dealership landscape is similar to ours too. They’re an emerging market for that middle class who are struggling to buy cars, which means that more people will be hitting that market. So, if we give them an option that isn’t a classified, like we did in Australia and also New Zealand, we’re hoping to see similar traction to what we already have here. Brazil is another market that we’re looking at. Rob: There’d be a language challenge there, though? Shaun: Yes, the good thing is that BMW is BMW in mostly all languages. South Africa. Rob: Really?