Fall 2008

SPECIAL ECONOMIC DOWNTURN IP ALERT

We understand that many of you are facing tremendous challenges as a result of the current economic downturn. At Cislo & Thomas, we are doing everything possible to find new and innovative ways to protect our clients’ intellectual property and help them avoid infringement claims. In doing so, we strive to use the most cost-effective means to provide the highest quality of intellectual property services. To assist you, we have compiled some helpful intellectual property-related tips to consider during an economic downturn:

1. BE MORE LITIGATION CAUTIOUS AND IP RISK AVERSE
Recently, we have noticed a significant increase in the number of intellectual property lawsuits filed in our local courthouse, the Central District of California. This may be due to companies wishing to protect their slice of revenue in a shrinking marketplace by eliminating or restricting competitors. As such, it is important to be very cautious with regards to any new product launches or any changes in branding in order to avoid potential third party claims. Such claims may or may not be legitimate, but may nevertheless lead to costly litigation expenditures when you can least afford them. Be sure to clear product launches or such changes to branding beforehand, and if challenged, consider early settlement proposals or mediation to resolve disputes quickly.

2. REVIEW PRODUCT LINES AND BRANDS TO TRIM NON-PERFORMERS
Now is the time to review your various product lines and services to determine which lines and related intellectual property should be maintained, trimmed, or dropped. Likewise, consider which lines need even more protection against third parties seeking to take away revenue or market share. For example, you may want to drop intellectual property for goods and services that show little future promise, in favor of better protecting your healthier product lines. Fewer product lines and brands can reduce costs and allow you to focus your marketing and protection efforts on the winners.

Similarly, consider possible changes in your customer base for particular products. In an economic downturn, consumers may seek to substitute less expensive alternatives for some of the products to which they were previously accustomed. As a result, you may find that your revenue can be better maintained by directing a particular product to a broader category of customer(s), including possibly offering it through different commercial channels or different retail establishments.

3. CONSIDER PRODUCT AND BRAND LINE EXTENSIONS WHICH ADDRESS RECESSION
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In an economic downturn, it is often difficult to sell products or services unless there is a shorter timeframe for return on investment. Companies and consumers will be seeking ways to reduce their out-of-pocket expenditures and may be willing to purchase products and services that provide an immediate cost savings or overall efficiency. Therefore, consider new products and services that provide purchasers with greater economic advantages, cost savings, or better overall efficiencies.

4. CONSIDER GOVERNMENT-BACKED SPENDING AND GREEN INITIATIVES
As the recession continues, the amount of consumer and business spending will decline, but this spending may be offset by extensive government spending on infrastructure, environmental concerns, healthcare management, and other new administration initiatives. Consider how your industry might benefit by offering goods or services to those areas, or how it can take advantage of the expected economic stimulus packages forthcoming. Explore how you can tailor your goods or services to serve one or more of these areas.

5. SPEND THE TIME NOW TO DEVELOP NEW PRODUCT LINES AND BRANDS TO ROLL OUT TOWARDS THE END OF THE RECESSION AND SERVE PENT-UP DEMAND
Although the direction of the economy is impossible to predict with certainty, many economists foresee an upturn in the next twelve months or so. Accordingly, now is the time to invest in new products and brands that will be popular once the recession inevitably runs its course. Once the upturn occurs, there will be great opportunities for new products and services to serve the pent-up demand of consumers and businesses, as well as address innovations which we will undoubtedly see as a result of economic restructuring. This is an excellent time for businesses to use their creative abilities to reposition their products and services in a manner to take advantage of the economic upturn when it presents itself. Having your products IP-protected when the upturn arrives places you in a stronger position than if you were to begin seeking IP protection when the upturn arrives.

Regardless of the economic outlook, however, it is still very important to file patents, copyrights, and trademarks to protect your products and systems. In particular, patents, with their longer lead times, should be filed well in advance of bringing a product to market. If the patents issue around the same time the product becomes popular, they will provide key protection against inevitable knock-offs. The increasingly global markets will continue to present great challenges to domestic companies. Intellectual property will be one of the principal ways to maintain your competitive advantage, including foreign intellectual property.

6. CONSIDER LICENSING FOR ADDITIONAL REVENUE
Consider licensing your products to other companies in market segments you cannot reach to help increase your revenue stream. Sometimes, there is synergy between two companies offering similar products, particularly if they are not serving the same set of customers, either demographically or geographically. Other times, licensing can help a product achieve a “critical mass” and drive additional sales. If producing or selling the product has become too burdensome, you might consider granting an exclusive license to essentially “outsource” the production and sales.

We hope these insights are helpful to you during these difficult times. We look forward to doing everything we can to help control costs for our clients while protecting their valuable intellectual property. It is through these great economic dislocations that we can expect to see significant new developments which will thrive and push up between the cracks of our economy. We hope that we can assist you and your company to continue to be successful.

Peter S. Veregge, Esq.- Newsletter Editor