Protecting Kiwi inventions – everything from water balloons to space rockets – from global theft can be a daunting and expensive process. Jane Phare talks to experts and businesses owners, including toy giant Zuru, about the best way to protect intellectual property and whether it’s worth the expense.

In a large manufacturing plant in Gisborne, a series of robots are making wooden planks. At first glance – if onlookers were allowed in – that seems unremarkable. But on closer inspection, those robots represent fiercely protected technology that could earn Wood Engineering Technology millions, if not billions, of dollars in the future.

Quietly, patiently and precisely over nearly two decades, the Kiwi engineering/technology company has mastered making super-strong planks from all parts of the tree, including the low-value core normally used to make pallets and crates. Now it wants to sell the technology to the world.

Wood Engineering says its laminated engineered wood planks, 40 per cent stronger than equivalent standard structural timber, will revolutionise building practices and will ultimately be worth millions of dollars earned from global licences, and contracts to build state-of-the-art plants overseas.

We’re talking technology so sophisticated that if staff turned the lights off and walked away, robots would continue doing the work – a so-called dark factory. For that reason, the company’s managing director Peter Pettit says, Wood Engineering has spent hundreds of thousands of dollars on patent protection between 2004 and its latest application in 2019.

Fending off the big players

Unlike sophisticated robots, protecting intellectual property (IP) is more of an art form, a dance if you like between weighing up the cost, deciding how much detail to give away in a patent application and hoping like hell that an audacious global giant doesn’t pinch the idea.

Fending off the big players with deep pockets – companies that know it’s cheaper and easier to steal someone’s IP and risk a legal fracas than to pay for R&D – can be complex, take years and chew through millions of dollars in fees from patent attorneys and lawyers.

For Zuru Toys, that battle is part of everyday business. The company, founded by Kiwi siblings Nick, Anna and Mat Mowbray, has a team dedicated to hunting down counterfeit toys and throwing them out of the playpen. They monitor global online platforms like Amazon and Ebay, and keep tabs on retailers and suppliers, spotting between 1000 and 1500 infringing listings every month.

If the copycats won’t listen to reason, Zuru engages top patent attorneys in New Zealand and overseas to make sure they do. The company also has a dedicated IP manager who oversees more than 1000 of the company’s IP rights, across patents, trademarks and copyrights, defending Zuru’s patch in a business said to be worth more than a billion dollars.

Zuru’s chief operating officer Anna Mowbray says the company has spent thousands of hours and many millions of dollars on protecting its IP, and will continue to do so.

“It becomes part of operations when you are in business. It’s just one of those things you’ve got to deal with. It is also a sign that you’re doing something right.”

Zuru’s biggest win was two years ago against US giant Telebrands which ripped off the company’s signature Bunch O Balloons product, several times. Zuru fought back in conjunction with Josh Malone, the original designer who came up with the concept of filling 100 balloons with water in 60 seconds.

Each time Zuru challenged the patent breach, Telebrands changed the design slightly. But that wasn’t enough to convince a US court which, after a long-running battle, awarded Zuru $42 million in penalties, damages and costs.

Unbelievably that hasn’t deterred other competitors from having a go. Mowbray says Zuru is currently fighting at least eight other companies that have copied the Bunch O Balloons concept.

And it’s not just a one-way battle. Zuru Toys is on the receiving end of an icy blast from Danish toy company Lego, claiming Zuru’s Max Build More and Mayka figurines closely resemble Lego Minifigures.

Lego won an injunction to stop Walmart from selling the Zuru product, after arguing the Kiwi company had infringed its copyright protection, trademarks and design patents. Zuru is defending that claim and has countersued, alleging Lego is using anti-competitive tactics.

Mowbray acknowledges that Zuru has the resources to fight off big players – the average cost of defending a patent in the US is climbing towards $2m – but as a rule she’s cautious about going to court.

“I’m very selective and very considered in my approach to litigation. I want to ensure we are in a position of strength, and in a winning position.”

Mowbray says because the full patent process can take years, it’s a decision that needs careful thought. If the product is likely to have longevity, is commercially viable and ticks the patent boxes – it solves a problem, is novel and not obvious – it makes sense to apply for a provisional patent to buy time.

IP experts say there are other ways to protect your invention or technology without necessarily having to engage in the patent process. Consider trademarks, copyright and design registration as alternatives, they say.

In the case of Zuru’s popular Rainbocorns toys, the company uses trademark protection but doesn’t apply for patents because the plush toys are trend-based with new characters introduced every season.

Keeping trade secrets

One of the best protections against predator copycats is to simply not tell anyone about it, IP experts say. That means not talking to friends, posting on social media or giving an interview.

It’s something Nicola Johnstone, head of intellectual property legal at UniServices tells University of Auckland students and staff embarking on the mother-of-all-inventions process. Keep control, she says. Limit access to the manufacturing process, lock down the software, keep sensitive information under wraps.

“If you lose control over that trade secret, then it’s no longer a trade secret.”

Associate Professor Alex Sims at the university’s department of commercial law, warns her students to keep their work secret at least until they have applied for a provisional patent. In the case of legal action, the first thing the defending party will do is look for evidence that the idea was revealed before the patent was lodged.

And she warns start-ups about approaching bigger companies or investors in case they simply copy the idea. Insist on non-disclosure agreements, she says.

“If someone says ‘don’t worry, you can trust me with the information,’ run a mile.”

Consult a patent attorney early on because chances are, somewhere in the world, other people are working on the same idea, Sim says. The first one to register will get the protection while the others are stopped in their tracks.

“It’s almost like winner takes all.”

Patent process no quick fix

Earning a full patent is never a quick process, depending on how long the examiners take to approve the claim. Wood Engineering Technology is still waiting for approval of a US patent the company filed in 2010, and it still doesn’t have patent protection applications fully processed in some countries for its original technology.

However watertight patents can be worth the effort. One of the most memorable stoushes in New Zealand’s early corporate history was a fight-to-the-death battle over a revolutionary tumble clothes drier in the late 1970s, covered by author Keith Davies in his book, Defying Gravity, The Fisher & Paykel Story.

F&P engineers had developed the brilliantly simple concept of a pressurised cabinet that would dry a load of washing and was cheap to build. Before that the only dryer was a “monstrosity” that resembled an overgrown fridge with an element in the bottom, according to Davies’ account.

“It was a case of hanging clothes above the heater and waiting for them to dry or catch fire, whichever came first.”

The F&P dryer earned the company millions of dollars in royalty payments for the licence but British manufacturer Thorn EMI thought they could get away without paying. F&P began legal action which would continue well into the 1980s.

At one stage Thorn EMI claimed a tiny clothes dryer, designed for drying women’s underwear, had been produced by Sunbeam Corporation in the US before F&P’s dryer. Such a claim would make the Kiwi company’s patent invalid.

Where is Captain Slinger?

Thorn even advertised in British newspapers, offering a reward to anyone who had bought one of the mini dryers. Bizarrely a woman claimed she had been given one by an American coastguard captain named Slinger.

Private detectives were engaged, Captain Slinger was found to be non-existent and Sunbeam confirmed the claim of a mini dryer was nonsense. Thorn EMI was forced to pay F&P substantial damages, legal costs and a licence fee.

Aucklander Ken Moon, of patent attorneys AJ Park, has worked in the industry for 50 years and, from 1992, would spend a day a week at F&P’sEast Tamaki headquarters, helping the company fend off global rivals.

He remembers F&P staff, who had attended whiteware trade shows around the world, shipping home suspicious-looking copies they had spotted, stripping them down and then calling Moon to begin legal proceedings.

The Gentle Annie and SmartDrive washing machines, and later the dish-drawer dishwasher, were also closely guarded by a series of patents. Moon says one of the benefits of a strong patent is that competitors can’t copy the product and drive down the prices, without having to invest in R&D.

Peter Pettit can relate to that. Wood Engineering Technology has so far invested $30m in R&D, patent protection and building the plant in partnership with Trust Tairawhiti (formerly the Eastland Community Trust). It’s technology that has resulted in a 150-metre-long plant run by a computer with 3000 sensors that tells the plant staff what to do using software developed by mechatronics engineers based in the US.

“It is truly AI (artificial intelligence),” Pettit says. “If a saw blade somewhere is slowing down because it’s getting blunt it will send a message to one of the engineers.”

“Nobody else in the world is doing it. What we’ve done is worked out how to do it without touching the log. It’s all automated.”

The company has spent hundreds of thousands of dollars filing patents all over the world.
As Pettit sees it, Wood Engineering can’t lose. Several billion people will need houses in the next 30 years after moving from rural areas to cities, research predicts he says.

“They’ll have to live in wooden buildings. There is not enough concrete and steel to build the buildings for them.There will be a huge demand for our plants and also wood is a carbon-neutral building product.”

Despite the patent protection, Pettit and his team are conscious of the ability to reverse engineer the product.

“When you get the product in your hand you can actually see how we’re doing it,” he says.

But not quite. There’s a missing-link trick to writing patents which Pettit calls a “black art”. It means there are gaps in the patent applications to flummox the opposition.

It’s a technique that Sims teaches, leaving a bit of the jigsaw out. That missing “know how” can be used to extend the life of the patent or can be licensed to companies that want to use it.

Deep-tech startup protects its IP with patents

Four young Auckland engineers have so far spent $20,000 on patent applications to safeguard the IP of their agri-tech company Cropsy Technologies but if things go to plan it’ll be worth every dollar.

Former Pakuranga College students Leila Delijkovic, Ali Alomari and Rory Buchanan, all 24, and fellow engineer Winston Lu, 22, have developed technology that enables viticulturists to accurately assess the health of every grape vine without even getting off the tractor.

Inside two Cropsy-invented boxes attached to either side of a farm vehicle are specially developed cameras that constantly scan the vines, analysing the stems, leaves and fruit for evidence of blemishes, disease, mildew, rot, dying plants or under-performing rows.

The cameras are connected to a central processing unit onboard the tractor. Using an app, the viticulturist can log in immediately to access the data, showing a highly accurate “map” of the health of the vines.

Cutting out reflection and adjusting to changing light was part of the technology developed by the Cropsy team.

“That was the big problem that we solved,” Delijkovic says. “When you take a camera outside and try to do crop analysis the changing lighting conditions will absolutely destroy your algorithms.”

Alomari: “That’s really what we’re patenting. The hardware is what enables the artificial intelligence to achieve high results.”

Although Cropsy has concentrated on vineyards for its R&D, the technology can be used for all “trained” fruits like kiwifruit. Cropsy sold its first unit to a South Island vineyard last month and has others on trial in Blenheim and Hawke’s Bay.

Now looking for investor funding, Cropsy filed a provisional patent application for a new development last week and is now working on a third.

“A startup will never be able to defend a patent but an acquirer will be able to,” Alomari says. “By not having a patent effectively we’re just selling our acquirer a customer list and trade secrets.”

Alex Sims agrees having a portfolio of patents is a valuable tool for marketing, and approaching banks and investors.

“The first thing they’ll ask is ‘what intellectual property have you got?’ Even though the protection might be illusory, they like it. If you don’t get a patent, all you’ve got is a head start.”

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