Power of design to support achieving "Zero to One" in startups and new businesses. Following the previous article, "Practical Cases - How Design can contribute to Startup Growth," we will discuss utilizing design and its intellectual property rights in this chapter.
The design may often be considered a means for creating shapes, visual expressions, or fruits of such creation. However, it is essential to bear in mind that the practical utilization and application of such fruits are related strongly to intellectual property rights. In this chapter, we will explain intellectual property rights from two points of view: the intellectual property rights to be brought to attention while designing; and the intellectual property rights generated by design.
(Written by: Hiroshige Fukuhara, Sony Design Consulting / Yasuhide Yokoi, Final Aim)
Some ideas and creations produced through human intellectual and creative activities have values as assets, called "intellectual property (IP)."
"Intellectual property rights" are the rights given to such intellectual property for exclusive use over a certain period of time. Various laws, such as Copyright Law and Unfair Competition Prevention Act, regulate intellectual property rights.
Four of those intellectual property rights, i.e., patent rights, utility model rights, design rights, and trademark rights, are called "industrial property rights." Examples of industrial property rights are various fruits of design, such as product or company names, logos, icons, product appearances, sonic logos, new technologies, and business models realized by such technologies.
Utilization of industrial property rights can contribute to business growth by protecting the above-mentioned fruits from mimicry of competitors and generating new business from intellectual property.
As mentioned above, intellectual property right is an extremely important subject to be dealt with for management strategies and design utilization procedures in not only startups but also all enterprises.
To describe a more practical example representing the importance of intellectual property rights, let us assume you have launched a new service with a new name, selling the service or the product without trademark research or registration of the service name and without recognizing an existent preceding service having the same name, which has been registered as a trademark.
In such a case, you have a risk of falling all of a sudden into a situation where the business owner of the preceding service files a claim for suspension of sales of your service or product or for a product recall (when a product is recalled, the manufacturer of the product must collect the products from customers for repair or exchange for free). Furthermore, the owner of the preceding service may claim compensation for damages.
Such incidents may cause your business to collapse, and you might face the worst-case scenario of closing your business.
Trademarks are "names" that can attract attention and are prominent examples, yet the same thing can be said for patents and designs.
Especially for startups requiring novelty and growth speed and “competitive advantages” and “differentiation” are their vital strategies, the perspective of intellectual property rights is indispensable for developing such intellectual property into an actual business.
You may think that we have been talking about obvious things. However, through our experiences, we cannot but recognize that startups and small enterprises in Japan have very low awareness about intellectual property rights or industrial property rights.
In addition, there are few cases where designers themselves engage in an attempt to continuously learn or understand industrial property rights. If the owner of the business has low awareness of IP and the designer in relation to the business has no knowledge about IP, you might end up having a business that looks unique but actually is illegal without having "originality protected by law."
When you think about property rights, due to an impression of the word "rights," many of you may have an image of claiming one’s rights. However, it is appropriate to think that it is basic to take intellectual property rights and industrial property rights as "defensive first" in terms of an order of offense and defense and to strengthen “offensive” only after reducing risks as small as possible.
The expected merits when defensive is primary are avoidance of conflicts with other’s rights; prevention of third party’s mimicry; prevention and restraint of entry of competitors into the business; and maintenance of values of the service or the product.
The expected merits when the offensive is primary are an announcement of the company's strength in design and technology; improvement in credibility and images of the company in society; fundraising from investors and banks; grant of a subsidy; and additional income from licensing of the rights.
Large corporations holding a team of IP specialists or designers with high awareness of IP are able to naturally proceed with research, applications, and registrations of their industrial property rights to realize design based on the establishment of ownership and to develop projects, even if they only have the defensive perspective.
Nevertheless, any enterprise or service, regardless of its size, should work on establishing its rights from both offensive and defensive perspectives, with industrial property rights as a major premise.
Generally, every business goes into the world provided with some design.
In that sense, it can be said that there is a strong connection between design and intellectual property. It is impossible to avoid paying attention to intellectual property in design activities.
Every fruit created by anyone, including designers, is a copyright matter protected by Copyright Law. That is, not only the creations made by designers but also every creation, including photographs, illustrations, texts, and moving images, has a copyright (a copyright, a moral right of an author) and is automatically protected without taking any measures.
Since creation is their profession, designers especially should not carry out the design in their creation process without paying attention to copyrights held by others.
Needless to say, there are rights to product shapes and logos of corporations or services. These rights can be roughly divided into "design rights" for shapes and "trademark rights" for logos. Icons may have both "design rights" and "trademark rights," and combinations of sound and colorings may have "trademark rights" in some cases. In addition to the above, there are cases where “copyrights” and “patent rights” are also involved.
These may sound contrary to creativity and give you the impression that you are tied down by rules, and you cannot do anything. However, just as it is impossible for a person who does not know the rules of chess to win in a chess game, without knowledge of IP, you may be sued for a violation of the law, or, to begin with, it is even impossible to produce novel intellectual property. In other words, high awareness of IP will allow you to avoid risks in advance and gain new rights.
This will be slightly complicated as an example of ownership, but let us give examples of pictures taken during a football game in a stadium.
Let’s assume there are photographs of two football teams playing a game in a stadium. The photographs can tell you which stadium it is at a glance.
First, for the scenic photo of the entire venue from a distant view, you may need to ask the architecture owner for permission to use it. For the photograph with a closer look, including players of both teams being mixed by well-balanced numbers, it might be necessary to check with the organizations, such as a football association, to which both teams belong. If the photograph focuses more on the players of one of the teams, you may need a grant from the club team, and if the photograph further focuses on a player, then you will need to request a grant from the player. On top of that, the photographer who took these photographs has the copyrights.
As mentioned above, just one photograph may require permission, and depending on how it is to be used, it may even hold a right to claim consideration for use. Photographs provided by services such as stock photos are often cleared with these rights; thus, designers and business owners do not always pay much attention to those rights. However, designers and business owners must always be aware of their rights.
From such points of view, to produce new intellectual property, the business owner must have a high awareness of intellectual property as a prerequisite and make the best use of the designer with increased knowledge of IP.
Intellectual property is “an asset," and holding intellectual property rights can enhance originality and legally protect the products from other companies' imitations, preventing business risks. In addition, if the other company wishes to use your IP, licensing the IP for monetization is also possible.
In other words, if you don't do anything, you risk being unable to complain or claim your originality when your competitors imitate your product without permission.
Any small ideas, such as a small shape of dent or protrusion or a simple structure or composition, can be given rights in many cases. On the other hand, if you have no knowledge about the importance of IP, you will end up making a product without acquiring its rights, providing the product, which could have been an asset, to third parties for free without notice.
Looking at the statistical data provided by the World Intellectual Property Rights Organization (WIPO) and comparing each country, it is obvious that countries in Europe and China have a high awareness of IP.
How is Japan doing here? Let’s look at trademark rights, for example, which almost every company/brand/service would make applications for, and Japan ranks 9th in the world for the application class counts in 2021.
If we look at the yearly development, the difference between Japan and the other countries is more remarkable. The statistical data below shows growth comparisons to the previous year, where Japan marks by far the most negative growth.
The next graph of the trend of the number of applications over the entire period shows that the number of applications steadily increase, in addition to economically big countries such as China and the U.S., in countries such as South Korea, India, and Brazil in the mid and long term.
Well, then, what is happening to design rights in Japan? As products such as cars and electric appliances symbolize Japan as a "great manufacturing country," Japan produces many industrial and brand products to which design rights pertain.
However, to our disappointment, the statistical data shows the opposite results. For example, Japan ranks 8th worldwide for design registration counts in 2021.
Regarding the overall trend and difference in statistics for each country above, we feel the same phenomenon is happening in startup businesses. For example, we picked up several startup companies in Japan and the U.S. (especially those that started in Silicon Valley) and carried out our survey on intellectual property.
We then found out that startups in the U.S. rapidly increase their registration counts of design rights or trademark rights with the growth of the companies and globally file applications and registrations in units of several hundred.
We also found out that they link their IP strategies to their business phases, such as fundraising, M&A, and IPO, and that the startups in the U.S. attempt to register design rights, for example, not only for overall designs but also for multi-layered registrations including registrations for partial designs and related designs. We were able to read from the survey results that the startups in the U.S. carry out specific and strategic IP activities with million-dollar scale investment budgets. In comparison, Japan's top startup company - a so-called mega venture - only has several tens of registered trademarks and designs, and the difference in awareness is obvious.
As mentioned earlier, “creation is the designer's profession," and designers are the ones who hold big opportunities for generating new intellectual property from new ideas while trying not to violate others' rights in the process of creation. IP has the strength of reinforcing the company and eliminating others with the help of law.
To make the best use of designers, paying attention to such IP and utilizing its effects on business frontlines is beneficial.
Written by Hiroshige Fukuhara, Sony Design Consulting / Yasuhide Yokoi, Final Aim
July 11th, 2023