What do tariffs and intellectual property rights have in common? Both are trade barriers. Intellectual property rights award monopoly rights allowing the owner to exclude all others, whereas tariffs seek to exclude foreign goods by making those goods more expensive.
Tariffs have been around for longer than patents and are once again en vogue. The United States has decided to increase tariff rates. The EU and China think that retaliatory tariffs will protect their own markets. History tells us that both are wrong, but businesses have to deal with the hand they are dealt. It looks as though this will involve navigating tariff walls for some time.
For decades, some countries have linked their intellectual property and international trade policies to promote the localisation of manufacture. On the one hand, company X may be granted a patent in country Y, but on the other, company X may be required to set up local manufacture or grant licences under the patent to local third party manufacturers. The other part of such policies is often a very hefty tariff on the import of manufactured goods.
For businesses engaged in trade with countries that impose significant tariffs, intellectual property rights can form the basis of a marketing strategy that avoids tariffs. With a patent in hand, manufacture of the patented item may be licensed to a business within the country imposing the import tariff. Alternatively, direct local manufacture could be established.
It is not only patents that can help a business navigate a tariff wall. Trade mark registrations also have an important role to play. The political purpose of tariffs is usually to encourage consumers to buy products made within the country imposing the tariff. However, the consumers may be attached to a particular brand. American citizens may prefer a British brand to an American brand or vice versa. A trade mark owner having a trade mark registration in the USA could license the manufacture of a product and application of the trade mark to a US based business instead of exporting a product made in the UK (or elsewhere in the world). A trade mark registration strategy is faster to implement than a patent strategy. For businesses who have been exporting to countries without having registered their trade marks in those countries, trade mark registration should be considered immediately.
For business exporting goods to countries where they do not have patents, a longer term strategy is needed. In most cases it will not be possible to obtain patents for goods that are already being exported, because they will be in the public domain and so not patentable. However, some countries do provide a grace period (of up to 12 months) during which one’s own disclosure, whether by sale or publication, is discounted when patentability is assessed.
