Rethinking IP: how the Intellectual Property Act 2014 impacts upon SMEs

October saw the passing of the Intellectual Property Act 2014, which heralds major reforms of intellectual property law in the UK. How will it affect SMEs?

Rethinking IP: how the Intellectual Property Act 2014 impacts upon SMEs

All businesses, big and small, will generate intellectual property (IP) of some sort and knowing your rights and having the right protection can prevent others from copying or imitating your brands, inventions, designs and generally any great ideas. IP law is a general term covering the various laws that aim to protect ingenuity, creativity and reputation. 

But change is afoot: as of October 1 various IP laws have undergone something of a makeover. The principal effect of the Intellectual Property Act 2014 is that it allows the UK to join the Unified Patent System and has made some key changes to the definition of a design to which unregistered rights may apply, the ownership of design rights and certain exceptions from infringement of unregistered designs.

Patrick Cantrill, IP partner at Bond Dickinson LLP, describes the Act as a “tidying up exercise” bringing the UK into line with European law.  As a result, the UK IP regime will now be responsive to the modern business environment and more flexible for consumers, with simplified and strengthened protection for the UK’s creative industries. It provides better protection for a number of sectors including the UK’s design industry, which is worth more than £15bn.

The major focus of this new law is on design and the Act continues a process of improvement in how designs are protected, that began back in 1988. “If you go to the 1980s, design right in the UK was incoherent and inconsistent because back then the only designs which were registrable were those regarded as being aesthetic. And yet, bizarrely, the most basic functional non-aesthetic designs could be protectable for far longer periods by way of copyright law,” says Cantrill.

One of the measures is a revised definition of what designs are protectable by UK unregistered design right. Previously UK unregistered designs were defined as “any aspect … of the whole or part of an article”. The updated Act removes reference to “any aspect”. “The problem was there was a feeling that people were bringing claims for the most trivial of features,” Cantrill says. He says the new legislation should stem this problem.

A more radical amendment relates to the ownership of UK designs. Following the 2014 Act, when a business commissions a third party to draw up a design, ownership will now remain with the designer unless otherwise agreed. Previously, the first owner of UK registered and unregistered designs was treated as the commissioner of the design, not the designer themselves. This change will obviously assist SMEs who are in the role of designers but could be problematic for SMEs that are commissioning designs and who don’t take the necessary provisions. Cantrill warns that if in doubt, all companies should agree in writing at the time of commission who owns a design and what rights to use the design are granted to the other party.

“Prior to the Intellectual Property Act, with UK designs – unlike with European Community designs – we had a situation of ‘he who pays, owns’ but it is often the case that designers work for SMEs and would like to retain ownership of the designs in respect of works which are commissioned and if a commissioner wishes to own that design then they need to specifically ask for it and negotiate for it,” says Cantrill. As a result of these and earlier legislative changes, SMEs should look more closely at registration of their designs because in the last decade or so there has been a sea change such among the portfolio of IP rights available to owners, design registration across Europe has become more effective and easier and cheaper to obtain.

In simplifying design rights, the Act makes the system more user-friendly, especially around design right protection. The Act also simplifies the provisions for those eligible for UK design right protection.

The right to a design should in theory stop someone else from copying it but this wasn’t always the case. These changes to design law now make an infringement of this right is a criminal offence, bringing design rights into line with copyright law. “This will certainly be of interest to SMEs who design because they have an extra stick to beat people with,” Cantrill says. “The penalties are quite severe too; offenders could receive ten years in prison – the same length of time as for counterfeiting.” Nevertheless, criminal sanctions can prove to be a double-edged sword to be used both by and against SMEs, he says.

After all, IP disputes can be costly. Accordingly, under the Act, the UK Intellectual Property Office has introduced a non-binding service whereby an opinion on infringement can be given. As Cantrill explains, while the UK IPO’s opinion would be non-binding, the hope is that before rushing off to court such an objective, a third-party view might encourage people to settle their disputes without recourse to litigation.

Another key aspect of the 2014 Act is that it empowers the UK to join both the Unified Patent System (which still awaits ratification) and the Hague Agreement, an international system allowing for the registration of designs across a multitude of countries through a single application. Joining will allow for a faster and cheaper process for obtaining design registrations in most countries.

Other changes brought in by the Act include allowing ‘limited, reasonable use’ of copyrighted photos, songs, films and artwork for the purpose of parody without permission. Patent law changes also mean that the owners of patents will now be able to include a website address on protected or patent pending products. 

On the overall value of the Intellectual Property Act for SMEs, Cantrill is cautious. “The changes in the rules relating to the ownership of designs rule represent a significant change, as does the introduction of criminal penalties for registered design infringement and the extensions on what acts will no longer be regarded as infringements,” he says. However, he does not see the other provisions concerning the meaning of design and originality or the eligibility tests for unregistered design right, as having significant benefits for SMEs. 

“It would be inappropriate to claim that the 2014 Act is targeted for the benefit of the SMEs,” he concludes. 

Ryan McChrystal
Ryan McChrystal

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