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IP theft: A global issue catching NZ businesses off guard

21 Nov 2018
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Delta Insurance is warning New Zealand businesses about the dangers of intellectual property (IP) thieves, particularly businesses that operate in overseas markets.

Delta Insurance conducted a review into IP risk management and found that China and the United States are hotspots for IP theft.

The review says that China has long been known for product counterfeiting. In the US, ‘patent trolls’ that use IP litigation to extort money out of businesses are a major problem.  Intangible assets make up around 90% of the asset value of businesses, according to review author and Delta underwriter Avani Vyas. Most of that value comes from patents, copyrights, registered designs, and trademarks.

The review also points out that New Zealand companies registered 7000 trademarks and 300 patents in 2016, alongside $1.6 billion investment in R&D.

“We have this incredible record of innovation in New Zealand. But our innovative businesses haven’t always been meticulous in shoring up their IP and even when they have, they often aren’t prepared for the significant costs which can arise from IP challenges.”

IP litigation over in the US and China is also a booming trade: 31,000 patent infringements went to court in the US between 2012 and 2107, while Chinese courts handled 213,000 IP-related cases in 2017 alone – twice the figure of 2013, the report says.

New Zealand companies can quickly end up in trouble from issues like IP violations, IP attacks, and other challenges.

Fisher & Paykel Healthcare is just one company that was stung: It incurred almost $15.6 million in legal expenses to enforce its IP against a competitor.

Fonterra and Lewis Road Creamery are battling each other’s milk packaging, and Sealegs’ amphibious vehicle system suffered copyright violations from rival engineering firms.

“Kiwi companies are increasingly facing global competitors who are proactive and have resources to protect their IP. A recent case in point involved Coca-Cola who threatened a Wellington café with legal action if it didn’t change its name – ‘Innocent Café’ – which clashed with a UK juice brand trademark owned by Coke. A similar fracas also arose over My Food Bag’s use of the phrase ‘hello fresh’ in its marketing – which was challenged by global food company HelloFresh,” explains Vyas.

Delta Insurance general manager Craig Kirk adds that Delta is aware of IP litigation and launched insurance to provide some protection to New Zealand businesses.

“The time had definitely come to establish some form of cover for the often-staggering costs arising from, for example, fighting off a malicious patent attack in a US or Asian court or a legitimate challenge from a multinational,” Kirk says.

“Unfortunately, even with strong IP protection, businesses can still fall prey to costly IP litigation, which is why we felt this new insurance product was needed. And we can see nothing on the horizon to suggest that threat will reduce any time soon.”