IP and commercial considerations prior to and during the R&D stage of innovation

In a previous article, we outlined the various stages of innovation – from conception of an innovative idea, through the research and development (R&D) stage, followed by commercialisation, and then marketing of innovative products or services. We have also outlined what IP considerations are most relevant at each stage. The purpose of this article is to outline an example (which is based on a real-world example) that may assist in illustrating the types of IP considerations that were made prior to, and during the course of, research intended to lead to the development of a commercial product.

Commercial and IP considerations during R&D

In this particular example, an academic had been contracted by a commercial partner to conduct R&D to prepare a fire-retardant coating composition for a new market opportunity that had been identified. Initially, a “landscape” prior art review was undertaken (see our article here for further information on prior art searching). In reviewing the relevant prior art, it became apparent that there were two options, namely to either:

  1. start with a known fire-retardant coating composition and modify it to improve fire-retardancy; or
  2. take a known “standard” coating composition and modify it to introduce fire-retardancy.

Because there was some time pressure and a limited budget, it was unlikely that both options could be pursued simultaneously and naturally, therefore, the question arose as to which option was preferable.

In this case, the commercial partner’s attorneys were brought into the project from an early stage and advised that it was important to consider the IP position before starting and during research. In particular, it was important to consider:

  • the potential for patentability;
  • the potential for infringement; and
  • how to maximise the commercial value of, or add value to, the IP produced by the research at each stage of the R&D.

It is useful to explore these factors for both options a.) and b.).

Option a.)

In the case of the first option (i.e., modifying an existing fire-retardant coating composition to improve its fire-retardancy), assuming that the research was successful, patent claims could be directed to the improved fire-retardant coating composition. This of course assumes that the improved composition is new (i.e. no-one had previously modified the existing fire-retardant coating composition in the same way) and the modifications are arguably inventive. If the inventiveness was questionable, for example if routine modifications were made that had an expected outcome, it may be that the only IP protection which was possible was the “use”-type claims (especially if it was a new application), which would be a relatively narrow scope of protection, although use-type claims may still be commercially valuable.

The main issue that may arise is that the existing fire-retardant coating composition could “belong” to a third-party. Issues of infringement and whether there was freedom to operate could compromise the commerciality of the project. This is an important factor to consider prior to commencing the research, as significant time and money can be wasted if no license were to be given to the existing coating composition, or if it were not possible to buy the existing coating composition from that third party, in which case more time and effort would be required to work around the third-party rights. As third-party IP rights may act as “roadblocks” to commercialisation of a product or service, and as significant resources are usually required to commercialise new products or services, it is important to understand the risks of infringement before going to market. In this case, it would be preferable to start with an existing fire-retardant coating composition that was more than 20 years old, if possible.

Option b.)

In the case of the second option (i.e., whereby a known “standard” coating composition is modified to introduce fire-retardancy), assuming that the research is successful it is likely that the new fire-retardant coating is patentable (i.e., meets the requirements of novelty and inventiveness), including the use of it for the commercial purposes that had been identified in the marketplace. Claims to the new coating composition would comprise broad protection. Also, infringement issues would be less likely, as presumably the starting “standard” coating would be at least 20 years old, and therefore any IP rights relating to the starting coating composition owned by a third party would have expired.

The downside with option b.), however, is that a greater research effort is likely to be required to develop the new coating composition, meaning a longer time to market. This is in contrast with option a.), whereby a relatively lower research effort is expected as the existing fire-retardant coating composition is already known, and therefore the innovation could be expected on the market relatively sooner. Of course, this assumes that it is technically easier to improve fire-retardancy than to introduce it, and this assumption is one of the main technical factors which would determine the option to pursue.

The R&D process

During the research, it was important to define the specific steps that would be undertaken, and to review every step that may infringe third party patent rights, and to design the project around these constraints or seek licenses from the technology owners. Further prior art searching was also conducted as the research matured. Agreements covering ownership of the resulting IP were established, and various innovations which were not discernable in the final product were protected via trade secret.

The competition

During the course of the research and subsequent commercialisation it was also important to consider what the competition may do, as a competitive alternative can reduce the value of the IP resulting from the research. Accordingly, it can be important to consider understanding other technologies that work, and those that don’t work. From a strategic perspective, it may be appropriate to consider publishing other methods that work (i.e., a so-called “defensive publication”) since there will be less chance a competitor will compete using published technologies if they cannot obtain a monopoly on the technology. It may also be useful to keep trade secrets around what does not work, so that others expend resources and time investigating the negative results, keeping them out of the market for longer.

The “best” option

Returning to the question of which option was best, clearly there are a number of factors to consider, including those that are:

  • technical – which course of scientific research to pursue, for example whether it is technically easier to improve fire-retardancy than to introduce it;
  • IP-related – the scope of patent protection which is likely to be available and the risks of infringing third party rights;
  • commercial – such as the likely speed of bringing the innovation to market, and
  • practical – such as managing the overall cost of the project.

Additional factors to consider included whether the product would be exported to, or manufactured in other countries, in which case those IP-related factors must also be considered for those other jurisdictions.

Closing comments

It should be clear from this example that it is preferable to think about IP before one starts a course of research, and that there is a balance of science, law, and commercial considerations during the innovation process. Whilst a specific example has been used in this article, it should be clear that this could be replaced with another technical solution, and what is more important is the methodology that was followed rather than the specifics of this particular example.

The content of this article is general in nature and must not be relied on in lieu of advice from a qualified professional in respect of your particular circumstances.