IP Increasingly Important For UK Consumer Firms, Survey Finds

by Robin Pilgrim, LawAndTax-News.com, London

20 June 2006

A report published by KPMG on Friday has suggested that consumer companies are having to work increasingly hard to protect the valuable intellectual property (IP) associated with their brands, as counterfeiting becomes ever more sophisticated.

The professional services firm claims that IP management is fast emerging as a key to the competitiveness of 21st century businesses, and warned that businesses need to mark it out as a priority issue.

The report argues that the companies most likely to succeed in this newly IP-focused environment will be those that identify and implement best practices in managing IP as a central and strategic business issue.

Commenting on the launch of the report, David Eastwood, Global Head of KPMG’s Intellectual Property Services, explained that:

“Counterfeiting and piracy at a sophisticated level is increasingly affordable for small-scale criminals. These days, even garage-sized operations can produce enough counterfeit material to affect the bottom line of large companies. In addition, more and more counterfeiters are now working at a sophisticated level and the quality of the fakes is getting better.”

“Dealing with this issue is never going to be easy. As one commentator in the report pointed out, counterfeiters tend to be fast and efficient whereas law enforcement agencies tend to be slow and cumbersome. This creates a challenge – one which companies need to face by ensuring that their own layers of IP protection are up to the job."

"Unfortunately, in many companies, IP is still seen as an administrative issue or even a burden. In reality, IP is a key asset, particularly in a business world where the most important assets are expressions of ideas – expressions which can be transmitted instantaneously around the world at marginal cost. IP protection of those expressions therefore becomes critically important.”

The report suggests that the threat to IP has grown particularly fast in Europe. Open borders and European enlargement represent an opportunity for counterfeiters as much as for legitimate businesses. In particular, the increasing ease with which goods can be moved across national borders in Europe has created new opportunities for counterfeiters in products that need large markets to succeed.

In addition, KPMG argued, IP protection is not an area in which companies can count on much in the way of support from the general public. Many people still see the availability of counterfeit products as an advantage. However, counterfeit products can pose a very real threat to health and safety – as in the case of counterfeit car parts or drugs for example. Companies need to demonstrate that IP protection is as much about health and safety as it is about jobs and prosperity.

For this reason, the report suggested that companies need to think carefully about their public profile on IP protection. They need to plan their lobbying of governments – whether on an individual basis or through their industry associations. They need to review how they address customers on IP and how they argue the case for IP in society at large.

David Eastwood continued: “As well as considering the defensive issues around IP, companies also need to ensure that they are extracting maximum commercial value from their IP. For example, businesses which license out their IP often do not get the revenue they contracted for because licensees make mistakes or cut corners. Licensors should have arrangements in place to check or they will lose out. Furthermore, those that do check find that this helps to reduce counterfeiting.”

In short, the KPMG report recommends that consumer companies raise their game in three key areas:

• Internal management issues – auditing the company’s use of IP (both of its own and of third party IP), increasing understanding of IP as a business issue and giving it a more central and strategic role within the company;
• External issues – reviewing IP revenues and reporting processes, collaborating with external enforcement agencies and formulating strategies for private enforcement efforts; and
• Public profile – developing policy lobbying positions designed to keep IP on the policy agenda at national and international governmental levels as well as reaching out to customers to address why there is a demand for counterfeit goods.

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