I have a soft spot for successful business people. They are usually extremely intelligent, and if they’ve been in business long enough and have a few war wounds, they can also be gently philosophical, yet still driven to get up each day and fight the good fight. Add a sense of humour to this mix and I’m a sucker for the established entrepreneur.
One of my favorites of this ilk – I’ll call him John for this post – has been in business for over 40 years. He’s had his ups and downs; mainly ups, but those downs he once told me are like dog’s years – one year can feel like several but boy, do you learn a lot.
In the late 1990s, just as he had committed to retiring, John threw his hat in the ring again and invested in a small business, which thanks to his stewardship quickly became a multi-million dollar behemoth. Despite the fact that it put an end to his dreams of strolling around the world’s best golf courses, the new business got under his skin and energised him in a different way to all the others.
One of the unique elements to its success happened to be a seasonal backpacker workforce – and no, it’s not an agricultural business, but I won’t say anymore. In any event, this meant John came into contact with a flow of interesting people, who often had significant technical and creative skills but were choosing to travel the world. As a backpacker said to him in the staff kitchen one lunchtime, “A good thing, no?” A good thing, yes.
And so it happened that he found a young woman from Brazil waiting outside his office one morning holding a paper and eager for an impromptu meeting. In fact, she was too excited to wait for John to unlock the door, and her English was not exactly conversational, so she thrust the paper into his hand and disappeared around the corner.
As John described this to me he said the moment he looked down he realised the young woman had created the perfect new logo for his business. He claimed he heard angels sing from on high. It was exactly what he had wanted but hadn’t been able to get from his own in-house graphic designer. John made it all sound so miraculous I could just see a heavenly glow beaming from the office florescent lighting.
He ran into the young woman a couple of days later and offered her some money for her work, which she gratefully accepted; I think he gave her a few hundred bucks from the petty cash tin. John then had his graphic designer exactly duplicate the logo, and it was emailed to his trade mark attorney, who then filed it with IP Australia. In due course, a trade mark registration was granted.
Fast forward a couple more years, and now the trade mark/brand is inseparable from the business, and it’s on everything. Everything. John has never seen or heard from Miss Brazil. However, the itch to retire has hit him anew, and when a couple of offers came across his desk, they became more attractive with each passing day. Particularly, the offer from the American multi-national…
I think you know where I am going with this. See if you can imagine the US corporation’s next action; and a gold star for you if you guessed that a hefty due diligence pack was sent as things got serious.
Two of the first questions related to the company’s brand:
- prove registration – attach official certificates of trade mark registration in appropriate jurisdictions (✓)
- prove ownership – attach relevant legal contract or statutory declaration relating to trade mark’s creation by appropriately employed staff (oh, oh…)
As you have gathered, the first question was no sweat at all. The trade mark was registered in Australia and New Zealand, and certificates were sitting on the wall in John’s office, in fact. As for the second question, who owns the logo the young Brazilian woman slaved over at her desk one night in her backpackers hostel room in Kings Cross?
So I had a couple of questions for John of my own: Was there an employee contract? No, just a basic confidentiality agreement. Did she sign a deed of assignment or some other agreement transferring the IP to your business when you gave her the stack of cash? No. Was she employed as a graphic designer? John rolled his eyes at me. I knew the answer but still… Ok, final question. Do you know how to be in touch with the backpacker? John shrugged and said, “Nope.”
Snap! Suddenly, the brilliant logo, which I saw represented everywhere, from the sign on the building to the catalogs sitting on John’s desk in front of me, joined the spectral ranks of what I refer to as ‘ghost’ IP – intellectual property that you do not have clear title to, and won’t ever have it. Using a house analogy: you purchase a house, but neglect to have the owner give you the title to it, and even worse, you can’t find the owner to rectify the situation. (You may also want to read about ‘dirty’ IP – click here.)
Is this the biggest deal in the world? The short answer is: it depends.
But suffice to say it’s a question mark (potentially a very expensive one) John doesn’t need and could have been easily avoided at several junctures well before the backpacker designed the logo, and afterward, when John agreed to purchase it from her. So much of a business’s success with IP, and potentially its value, is about simple practices and/or systems that mean that any IP created in-house and by 3rd parties seamlessly becomes an asset, and certainly never becomes a risk.
After the ‘Brazilian experience’, I worked with John to create a realistic IP policy, and conducted an IP audit. He dutifully implemented the vast majority of my recommendations, and sought advice about the logo’s ownership from his lawyers. At this stage, he is yet to make a decision about selling…
If you are interested in learning more about the intellectual property in your business, click here for a 60 minute online training module based on a half day learning program I have presented to over 1,200 Australian and New Zealand CEOs, directors, business owners, and top executives since 1997. For IP training for business managers and executives, click here.
The more you understand intellectual property, the more valuable your business becomes.