Why IP Lawyers Should be Involved in Business Strategic Decision-Making

Why IP Lawyers Should be Involved in Business Strategic Decision-Making

I. Summary

Even in the creative industry, the general idea is that IP lawyers are only helpful in (a) filing and managing IP rights, and (b) licensing and enforcing the IP rights. As a result, in the circumstances where (a) a product is hard to be protected by traditional IP law system efficiently, or (b) the IP law protection is not strong enough to generate sufficient deterrence due to weak enforcement in many countries, entrepreneurs tend to not involve IP lawyers in their strategic decision-making.

This essay explains why IP Lawyers should be involved in strategic decision-making with negative examples of TV formats industry and a positive example – WeChat. I also argue that IP lawyer’s involvement can also boost the social welfare.

II. TV Formats Case Study

In the TV format industry, production companies typically hire IP lawyers in two stages of their business: (a) drafting licensing contracts, and (b) enforcing their possible “format rights” when competitors launch similar programs. In very few cases, IP lawyers are consulted before a program format is created.

However, globally, IP protections for TV formats are an unresolved issue. Most countries refuse to protect TV formats because (a) they are “ideas” of so that copyright protection is limited to stage designs or the fixed dialogue scripts; (b) they are generally not patentable and (3) the trademark protection is limited to program names and logos, banners or slogans.

In practice, the lifespan of a TV program is highly affected by the market monopoly level of the production company. If a producer retains a strong market position and thus can prevent competitors from borrowing their TV formats with economic or contractual means, then the TV formats can last a longer time. If, however, the producer cannot control the broadcasting or is a new joiner of a market geographically, then they will encounter difficulties.

In the digital age, copying TV formats becomes easier. Market barriers derived from monopoly is less and less helpful because profits are more and more be generated online. In contrast to the fashion industry, the factors like market lead and premier in price would not be helpful for sustaining the life of TV formats.

In this situation, and opposite to the granted thoughts, involving IP lawyers in strategic decision-making will indeed be helpful for a TV format producer to extend the life of its programs and may even expand the source of revenue in new markets. IP lawyers can do the following “untraditional” work:

(a) identifying markets where IP protections (especially for trade secrets) are strong so that the firm can prioritize the licensing targets;

(b) establishing slick distribution networks and international production bases to ensure speed to market, so that original TV format creators benefit from the first opportunity to bring a show to market in a new territory;

(c) formulating formal or informal agreements of non-disclosure, non-competition with potential collaborators prior to sharing any idea – while these may not be legally enforceable everywhere, the power of “quid pro quo” can be highly persuasive;

(d) formalizing and fixing the know-how (so that it is copyrightable and protectable as a secret) that cannot be easily discovered from watching a show; and

(e) pro-actively building the firm’s multiple TV formats as a package ready for licensing, so as to make licensing so easy that there is little advantage to be gained from copying.

III. Social Platform Case Study – WeChat

WeChat, developed by Tencent, is one of the greatest creation and successful product in the social media industry. Its successfulness can be shown from either the numbers of monthly active users (846 million in Q3 2016) or Tencent’s stock price (from about HK$30 in 2011, when WeChat was launched, to around HK$200, by the end of 2016).

Unlike its rivals, Tencent runs WeChat program by competing with another already popular product developed by the same company – QQ. There are a few rationales for this rare strategy. However, few observers have highlighted the significance of WeChat as an innovation of the business model that highly integrates IP lawyers’ work.

  • QQ was an imitation of the first generation of online chatting software – ICQ. The name of QQ derives from its original name “OICQ”, which is arguably infringing or at least free-riding the reputation of ICQ.
  • For WeChat, at the very beginning, IP lawyers’ involvement was limited. This can be shown from the brand name – the Chinese name of WeChat has been registered by a good faith individual before the app was launched. Thanks for its strong in-house IP team (in their traditional role), Tencent was able to acquire the registration after a few legal actions.
  • When WeChat evolves to a platform of social sharing by launching its “Public Account” function, which allows public subscriptions to the users’ blog-like articles, the IP lawyers involved in the strategic decision-making heavily:
  • Tencent developed an effective plagiarism detection program. However, given the great number of contents generated by users, such program won’t be much helpful if there is no strategic IP thought involved. Here are Tencent’s IP lawyers’ creations:
  • WeChat created a function of “Original Mark”. The marked articles can collect “Rewards” paid directly by the subscribers by pressing a button, then the real money will be transferred into the subscriber’s “Wallet” (another great creation with high involvement of lawyers). “Original Mark” articles also enjoy the advertisement injecting and other incentives set by WeChat.
  • Authors who want to obtain the “Original Mark” must continuously claim in each article that it is original, then the system will run the plagiarism detection program. This setup significantly reduced the workload of the detection program, as it will only scan the articles claimed by their authors to be original.
  • Authors of the articles marked “Original” will be alerted when the system detects a similar article in its random check. On the other hand, new articles who claims “Original” will be compared with existing articles and will be refused to publish if there is a substantive similarity.

There are other functions showing the deep involvement of IP lawyers, while the above already show that IP lawyer’s involvement enhanced the competitiveness of the product and created a rare environment in China where the users are eager to generate good quality original articles, which in turn brings revenues to Tencent.

IV. Conclusion

This essay reviews cases in the TV format industry and the social media industry. It shows that involvement of IP lawyers can improve the sustainability of a product and thus benefit to the growth of business. IP lawyers are not just litigators but can work creatively with the product development team. The “value” of lawyers will not be reduced due to such involvement but will otherwise be expanded.

More importantly, WeChat’s example and my comments on TV formats suggest that IP lawyers can help creating a better ecosystem where innovations are appreciated and encouraged. This brings obvious social benefits that are usually unseen in traditional “self-help” approaches for subject matters where simple enforcement of IP rights won’t be commercially efficient.

* Note: This essay was indeed a quick writing completed within 2.5 hours, delighted by the course of “Advanced Intellectual Property Law” led by William Fisher (Terry), the Wilmer Hale Professor of Intellectual Property Law at Harvard Law School. This essay, along with the earlier blog posts and forthcoming ones, will become a series of my thoughts on IP & Creative Industry. And hopefully, it can bring something new to both academics and practitioners.