V. MARKETING U.S. PRODUCTS AND SERVICES The EU's Single Internal Market: The EU is an especially important export and investment market for the United States, and the United Kingdom is the largest country destination for U.S. goods within the EU. American companies interested in exporting to the United Kingdom should approach it as an integral part of a European market, a commercial reality as the EU completes its work to harmonize market conditions on a regional basis. The European Single Market objective, established in law and emerging in fact, will remove internal barriers to the movement of goods, capital, labor, and services, thus forming a single $4 trillion market of 340 million consumers (rising to 370 million when enlarged in 1995). Former economic inefficiencies, such as trucks waiting at border checkpoints for documentation inspections or professionals being unable to work in other member states, will eventually be eliminated. The improved business climate alone is expected ultimately to increase purchases of U.S. goods and services. The completion of the EU 1992 market program--if accomplished as intended in a trade liberalizing, competitive and nondiscriminatory fashion--will stimulate significant new economic growth in Europe and create major opportunities for American exporters and investors. The Single Internal Market is projected over time to add 1.8 million jobs and to produce a $260 billion increase in demand for goods and services in the 12-nation block that currently includes the United Kingdom, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The major catalyst in the development of the EU Single Internal Market was the passage of the Single European Act in 1985. This legislation went into effect in 1987, enabling the EU Council of Ministers to adopt an Internal Market directive or regulation on the strength of a qualified majority, requiring 54 of 76 votes. Council votes are assigned by a weighted average. Previously, the Council of Ministers had to reach unanimous agreement for any directive to pass. A unanimous vote is still required for fiscal matters, decisions on the free movement of persons, and directives or regulations on the rights and interests of employed persons. The Single Internal Market program will eventually force European companies to become more competitive since they will no longer be guaranteed business in a protected home market. At the same time, American exporters will be able to manufacture to a single set of product standards as the EU adopts uniform standards for the entire Union. Previously, each country set its own product standards. Although U.S. companies will be able to approach the European Union as a single market, rather than 12 separate markets, certain local consumer variations in tastes and preferences will remain. EU member countries intend to maintain their national identities, but national borders will no longer be synonymous with trade barriers. To take advantage of new opportunities in a more competitive European market environment, U.S.businesses will have to revise their strategies in marketing, finance, warehousing, distribution and production. U.S. exporters are already saving money in administrative costs since all EU members now accept a single administrative document that eliminates the need for duplicate paperwork for goods shipped to and within the Union. For the first time, all 12 EU countries are using the same documentation and product classification system. The abolition of customs checks and formalities at internal frontiers will eliminate some 60 million forms previously used each year. Those controls that are retained will be administered through a system of cooperation between member states' tax authorities and a computerized network for exchanging information. DISTRIBUTION AND SALES CHANNELS Import Channels: As one of the world's most active trading nations, the United Kingdom has a well-developed network of import channels. British importers are well versed in the intricacies of foreign trade and have long experience in handling all types of products. Import channels vary with the nature of the product. Selection of an appropriate marketing channel is of critical importance to the success of any export marketing venture. Methods of importing vary considerably. Channels through which foreign goods move range from the branch offices of overseas manufacturers to import houses that purchase abroad and sell on their own account. Between these two extremes are sales agents (some of them manufacture equipment similar to that which they import), commission agents, specialized importers, brokers, and importing distributors. Frequently, larger business firms engaged in manufacture or domestic trade buy directly from overseas suppliers, while smaller firms find it more convenient to buy through intermediaries. Industrial equipment such as machine tools, electrical and non- electrical machinery, and iron and steel products are generally handled by sales agents, while office machinery is sold through branch offices or representatives of overseas manufacturers. Chemical products are largely imported by import merchants. Foodstuffs and some consumer products move through specialized importers. Computers, traditionally handled by a sales agent and, more preferably, by a distributor, have been successfully marketed by "salesmen" that have evolved as an interface between suppliers and distributors. In the case of capital goods and raw materials, direct selling is sometimes employed by foreign manufacturers, since the range of buyers is more limited. The distinction between the various types of import channels is not clear cut and considerable variation exists even within a single group of products. A recent development is the appearance of organizations that take care of the costing, warehousing, distribution, and factoring of import goods. These firms--sometimes referred to as "importers/ factors"--began as forwarding agents. As market conditions changed, they gradually extended their activities. Today, importers/factors still provide shipping, forwarding, and customs clearance services. On behalf of overseas manufacturers, they will also warehouse goods, price them for the local market, deliver anywhere in Britain, and do factoring, that is, the guaranteeing of manufacturers' invoices. Developing sales is still the responsibility of exporters. They can hold inventories and control sales in the United Kingdom through the use of these importers/factors, thus dispensing with subsidiaries. Larger UK distributors have annual turnover that greatly exceeds that of the average manufacturer. Consequently, they expect that foreign manufacturers will already have their products adapted for local sale and use. This point is especially relevant for the mass marketing of computers. Distribution methods of U.S. firms selling to the UK market vary with the products concerned and depend on the extent to which a particular firm is familiar with local market conditions. Generally, firms new to the UK market find it more convenient to appoint one distributor to cover the whole country. Later, in order to achieve greater market penetration, they often appoint other regional distributors. Wholesale and Retail Channels: Types of wholesale establishments in the United Kingdom differ widely. Some wholesalers carry a wide range of complementary and competitive merchandise, extending credit to retailers and even financing manufacturers. At the other extreme are commission agents or brokers who operate without inventory (and frequently on credit), placing orders only to cover their sales and, therefore, operating on an especially low markup in comparison with other wholesalers who carry out more functions. Methods of distribution vary according to the type of merchandise handled. Fresh fish, for example, is distributed directly by importers and wholesalers to processors (canners, curers, and meal and oil processors), freezers, and fast-food manufacturers. Importers also sell fresh and chilled fish to large catering outlets and to the retail trade through localized fish market facilities. Medical equipment sales are most effectively promoted by the use of specialist importers or in collaboration with UK manufacturers of noncompetitive equipment. Electronic components marketing through agents and distributors is the standard practice for sales of non- customized components; specialized components may require a different approach. In recent years, independent wholesalers have faced increasing competition from large-scale retail organizations with direct access to manufacturers able to promote sales through their own retail outlets and through mail-order businesses. As a result, only a portion of the trade in consumer goods now passes through wholesalers. This change has stimulated the creation of new forms of wholesale organizations for the benefit of both wholesalers and retailers. Smaller retailers, as a defense against the larger groups, have joined organizations incorporating one or more wholesalers. Through these organizations, they benefit from economies of bulk purchasing without the loss of independence and are able to have the advantages of sales promotion schemes. Computer marketing and sales practices have changed dramatically in recent years. As computers have become like other commodities, marketing practices have evolved to resemble those found in the United States. As declining prices and margins have made distributors and dealers' profits vulnerable, retailing is likely to evolve into heavy-volume, small- profit selling by superstores and value-added hardware sales that incorporate software and systems integration. The majority of all personal computer sales will eventually be made by retailers by the second half of this decade. Defense Sector: UK defense equipment acquisition programs are driven by senior level approved military requirements, much like DoD programs. The central staff (Land, Sea, Air, and Joint Systems) Operational Requirements departments are responsible for defining these equipment requirements, and obtaining the funding line. Once approved for acquisition, the MoD's Procurement Executive (PE) acts as the main executive agent for program competition in the UK. The U.S. Embassy's Office of Defense Cooperation maintains a close liaison with all of these organizations. Additionally, the MoD's New Suppliers Survives and Defense Export Services Organization are excellent sources of information for U.S. companies on: application procedures for acceptance to the MoD's Defense Contractors List; the MoD's acquisition organizational structure; and UK industry points of contact for teaming and sub-contract possibilities. Agriculture: The majority of retailers, wholesalers, manufacturers and caterers let importers and distributors handle logistics and take the risks associated with importing food products. Some retailers, who deal in large volumes of produce, occasionally import directly. In such cases, the retailer has a buyer or produce technician in the United States who places the order. Many importers of non frozen and chilled foods have in-house distribution networks and warehousing facilities, while smaller importers contract out. Many fresh produce importers have controlled atmosphere warehousing facilities and even pack houses catering to the growing retail demand for pre-packed, and sometimes trimmed fruits and vegetables. Almost all importers of frozen and chilled foods contract out to specialized storage, handling and distribution companies. Tourism: U.S. tourism providers seeking to secure a significant share of the UK travel market must first negotiate with tour operators for inclusion in the next season's brochures. The structure of the UK travel industry is such that, unless a destination or attraction is included in a tour operator's catalog, it is unlikely to be booked by other than independent travel agents, who are in the minority. USE OF AGENTS/DISTRIBUTORS: FINDING A PARTNER Agency Agreements: The United Kingdom, like many foreign countries, has definite rules and practices concerning agency agreements. Companies should obtain legal advice, both in the United States and in the United Kingdom, to ensure that they are not violating U.S. antitrust laws and that they are in compliance with local UK laws and business practices. National laws governing the relationships between agents/ distributors and manufacturers/suppliers are being harmonized throughout the European Union. In essence, the EU Directive which is the basis of these laws, establishes the rights and obligations of the principal and his agents, the agent's remuneration, and the conclusion and termination of an agency contract. When implementing the directive, member states can choose between two options for compensation in case of termination of a contract: indemnity (based on past and anticipated performance) and damages (based on immediate costs at the time of termination.) The EU Directive as implemented in the U.K., has been effective since January 1994 and applies to anyone who is "self employed" and has authority to negotiate and/or conclude sales or purchases of goods on behalf of a principal. With this broad definition, the Directive covers a wide variety of business people ranging from sales representatives to territorial sales agents. It applies only to EU-based contracts. General duties of the agent as outlined by the Directive include negotiating and concluding transactions as well as communicating to the principal all necessary information. The responsabilities of the principal include providing the agent with adequate documentation on to the goods covered and keeping in close contact with his agent on any commercial transactions involving both parties. The Directive also sets forth rules pertaining to payment, conditions pertaining to commission, and the circumstances for termination of the agency contract. Prospective agents overseas normally have standard agency agreements that they sign with foreign manufacturers. The Commercial Section in the U.S. Embassy in London can provide advice with respect to these types of agreements and can also supply a list of attorneys in the United Kingdom whom the U.S. Embassy has found to be reliable. Local U.S. Department of Commerce district offices, international banks, and freight forwarders also may know attorneys who specialize in foreign agency agreements. Agent/Distributor Service: The Department of Commerce's Agent/Distributor Service (ADS) helps U.S. firms identify prospective distributors or sales representatives in overseas markets. Through the ADS application form, the U.S. company representative specifies the characteristics sought in a prospective overseas representative. That information and appropriate product information is forwarded to the Commercial Section in the U.S. Embassy in London, which then makes a search of its database of appropriate local companies and consults with trade associations and chambers of commerce to determine the suitability and interest of UK firms in representing an American company's product or service. The process takes about 60-90 days from receipt of an ADS request to search for prospects and report the results. An ADS report intends to identify a minimum of three qualified firms that have expressed interest in a proposal. A typical ADS report includes the name and title of the person to contact, the telephone number, the cable address and telex number, and brief comments about the firm or its stated interest in the proposal. The U.S. principal then initiates contact, and if satisfied, negotiates a contract with the interested parties to secure local representation. New exporters should also consider participating in Department of Commerce trade promotion events as an effective means of identifying prospective agents and distributors. The Commerce Department sponsors a variety of trade events for the purpose of bringing U.S. exporters in direct contact with potential agents, distributors and, in certain cases, joint venture partners or licensees. Commerce Department-sponsored events provide U.S. corporate participants with previously screened appointments, booth space and utilities, pre-show promotion, etc. Information on these events can be obtained from Department of Commerce district offices located throughout the United States. The U.S. Embassy in London houses the Commerce Department-operated International Marketing Center (IMC). The IMC provides a prestigious venue for all types of promotional events, exclusively for American companies, their subsidiaries, agents, or distributors. Facilities include a 2,000 square-foot exhibition hall and an auditorium, complemented by a comprehensive range of marketing support services. The latter include assistance in identifying business prospects; printing show catalogs, flyers, and invitations; arranging appointments; and includes providing secretarial assistance and other logistical needs. Booking of the IMC is made directly with its staff; telephone: (44-71) 409-2927; fax: (44-71) 495-2944. The U.S. Embassy's Office of Defense Cooperation and the Foreign Commerce Section are excellent sources of information on the UK defense business climate. Information is available on UK industrial capabilities and various consultancy services. The MoD's New Supplier Service and Defense Export Services Organization provide information on UK industry for teaming and sub-contract opportunities. The Office of Agricultural Affairs at the U.S. Embassy, London can assist U.S. food and agricultural commodity exporters to identify potential importers for their product/commodity. Resources materials available include: an annual American Food Directory (cross-referenced listing of UK importers handling U.S. foods and beverages); a USA Wine Directory, computerized importer listings by product/commodity under the AgExport Connections database. (See appendix D for Market Briefs). FRANCHISING Franchising is a widely accepted form of business in the United Kingdom. Many U.S. franchisors are already established. DIRECT MARKETING Although direct marketing in the United Kingdom is similar in many ways to that of the U.S., legal restrictions, postal requirements, subtle but key linguistic and cultural differences, and differences in list management/availability and response mechanisms make it important to use the services of a UK advertising agency or direct marketing house to create parallel UK direct marketing campaigns, or to adjust U.S.- generated promotions for the UK market. Postal Importations: The Post Office's bulk handling center in Swindon handles more than 230 million items per year. Growth is expected in the telemarketing and product fulfillment services. The British Code of Advertising Practice (CAP) has established rules for direct mail advertising and list and database management. The rules set forth the obligations of advertisers on conformity to product standards, delivery times, goods sent on approval, customer lists privacy protection, etc. The code and the supplementary rules can be obtained from the CAP at Brook House, Torrington Place, London WC1E 7HN; telephone: (44) 71 580-5555; fax: (44) 71 631-3051. Consignments of goods imported by letter or parcel post must comply with internationally agreed arrangements that are established in UK postal and customs regulations. One essential requirement is that postal packages must be accompanied by a properly completed customs declaration. Normally, a formal Customs and Excise import entry is only necessary for consignments of high value, for goods eligible for certain tariff relief, or where further information is required. JOINT VENTURES/ LICENSING Joint-venture and licensing agreements are common practice and are widely utilized in the United Kingdom. Recent developments in the economy including further privatization of state-owned industries, reforms in the National Health Service and further deregulation of the telecommunications market present particular opportunities to U.S. firms as joint-venture partners and licensors. Britain's telecommunications sector is more liberal than that of any other European country. Equipment and value-added network services (VANS) provided by U.S. firms are able to compete on equal terms as UK and EU providers, and already hold an impressive local market share. Plans to privatize all or part of the railroads, the postal system, the prison service and air traffic control offer significant joint venture possibilities to U.S. businesses. The inclusion of private U.S. firms possessing the products, operating experience and best practices as partners with established UK firms can add credibility to their bids for franchises. Such Anglo-American joint ventures have so far been successful in winning franchises for operating prisons, and even the national lottery. The requirement for industrial participation in major UK defense acquisition programs has driven U.S. contractors to establish commercial partnerships with UK companies. In various programs, U.S. contractors have chosen a UK firm to lead the bidding as prime contractor, in order to overcome the "buy national" advantage of onshore competitors. STEPS TO ESTABLISHING AN OFFICE Establishing an office in the United Kingdom is relatively inexpensive and straight-forward and a wide range of support services are available to assist in this task. Also simple is the appointment of a local representative already established in the market and experienced in the ways of doing business in the United Kingdom. The Foreign Commercial Service, the Travel and Tourism Office, and the Agricultural Trade Office, all at the U.S. Embassy in London, are able to provide advice and assistance. The Invest in Britain Bureau of the British Department of Trade and Industry offers help to those interested in investing in the United Kingdom. (Please see the contact list in the Appendix.) Tax Treaty with the United States: A convention between the United States and the United Kingdom with respect to income taxation has been in existence since April 1945. A number of protocols amending this basic convention have since come into force. Details relating to double taxation arrangements between the United States and the United Kingdom can be found in Statutory Instrument 568, entitled Double Taxation Relief (Taxes on Income) (USA). The convention applies to the taxation of profits arising from a permanent, commercial establishment in the United Kingdom. Copies of this document are available from Her Majesty's Stationary Office at 49 Holborn, London WC1 6HB, Tel: 011-44-71-873-0011, of by calling their representative in the U.S., Kraus-Thompson Publishing, at (914) 762-2200. Under the provisions of the U.S.-UK Double Tax Treaty, certain classes of income arising in the one country are exempt from the other country's tax, if the income flows to a resident of the other country who is subject to tax on it there. For taxation purposes, foreign-owned firms are categorized as non-resident companies, that is, companies controlled and managed abroad but conducting business through a permanent establishment in the United Kingdom. A company which is merely represented by a commission agent or a broker is not regarded as a permanent establishment unless the agent has the authority to negotiate and conclude contracts on behalf of the foreign principal. The term "permanent establishment" includes, branches, offices, factories, workshops, mines, oil and gas wells, quarries, or other places of extraction of natural resources, and building or construction or installation projects that exist for more than 12 months. Business may be carried on through a broker, general commission agent or other independent agent, or through a salesman not authorized to conclude contracts, without incurring permanent establishment status. In addition, licensing another company to make and sell products in the United Kingdom will produce royalty income exempt from UK withholding tax under the tax treaty. SELLING FACTORS/TECHNIQUES The Competition Act: The U.K.'s Competition Act (of 1980) governs such practices as exclusive agency, exclusive chain selling, exclusive supply arrangements, exclusive purchasing contracts, restrictive terms, and other related matters. Manufacturers and exporters are able to appoint exclusive agents and to determine the method of distribution. However, they may not prevent the import or sale of competitive goods from other sources, including parallel, or "grey," imports from dealers and distributors in other countries. Practices of concern under the act are those anti-competitive measures that restrict the production/distribution pattern to benefit the manufacturer in such a way as to make it difficult for competitors of the manufacturer's appointed agents to attract customers or suppliers. Such restrictions may make it difficult or impossible for new competitors to enter a market and may be subject to challenge under the Competition Act. On the other hand, "vertical restraints" may, in some cases, improve the efficiency of distribution without harming competition. In such circumstances, they would not amount to an anti-competitive practice under the act. Anti-competitive practice is defined in the act as a course of conduct pursued by a person in the course of business that has, or is intended to have, the effect of restricting, distorting, or preventing competition in connection with the production, supply, or securing of goods or services in the United Kingdom, or any part of it. The act does not apply to agreements between a UK resident and a nonresident. These agreements are generally covered by contract law, which takes a laissez-faire approach to terms and conditions freely agreed upon between the parties to a contract. On a related front, the European Union has adopted legislation establishing the obligations and conditions of European agents and their foreign suppliers. The purpose of this legislation is to harmonize the laws and provisions of the member states governing the relations between commercial agents and their principals. The directive establishes terms and conditions regarding the respective rights and obligations of the principal and the commercial agent, remuneration of the agent, and the conclusion and termination of the agency contract. To date, implementation of the directive has been slow, but U.S. firms entering into agency contracts in the European Union should be aware of the principles of the directive. Changes to British law and the increased regulation of the principal- agent relationship will encourage U.S. exporters to determine carefully the most advantageous channel of distribution, and the ensuing legal responsibilities of all parties. Alternatives to the appointment of self- employed commission agents include the use of distributors or the hiring of salespersons as company employees. All forms of representation should be carefully explored with legal counsel to determine the legal consequences. ADVERTISING AND TRADE PROMOTION (INCLUDING LISTING OF MAJOR NEWSPAPERS AND BUSINESS JOURNALS) It is advised that print and other advertising designed for the U.S. market be vetted by a UK advertising agency or direct marketing house to modify promotions for legal, cultural, and other differences between the two countries. (See Direct Marketing, above). Advertising in the United Kingdom is highly developed and practices are similar to those of the United States. Several hundred advertising agencies operate in the United Kingdom, and most of the major American agencies have a significant UK presence. The full range of specialist advertising and market research services is readily available. The industry is self-regulating, with the Advertising Standards Authority, located at Brook House, 2-16 Torrington Place, London WC1E 7HN, overseeing the practices of the advertising industry and enforcing the provisions of the British Code of Advertising Practice (CAP). Advertisers should inform themselves of the CAP regulations. Of the approximately $12 billion in annual advertising expenditures, 60 percent goes to press advertisements and 31 percent to commercial television. The main vehicles for press advertising are the 130-odd national daily and Sunday newspapers. Of these, there are 12 dailies and 9 Sunday newspapers with national circulation. They are classified as either "quality" or "popular" papers on the basis of their style and content. With their immense circulation and deep penetration throughout the country, these newspapers are extensively used by manufacturers to advertise their products. Total circulation of national newspapers is approximately 15 million on weekdays and 18 million on Sundays. Major national 'broadsheet' newspapers include The Times, Financial Times, Daily Telegraph, Guardian, and Independent. National 'tabloids' include the Daily Mail, Daily Mirror, and The Sun. (see Appendices for list of specialist publications.) Commercial television programs are delivered on a regional basis, and advertisements may be run either regionally or nationally. The state- sponsored British Broadcasting Corporation (BBC) does not accept commercial advertising on its radio or television stations. The quasi- governmental Independent Broadcasting Authority (IBA), regulates television advertising through its code of advertising standards and practices. In any one hour of broadcasting, the commercial time is limited to nine minutes. However, the average hourly time for commercials per day cannot exceed seven minutes. Certain types of commercials--such as cigarette and gambling ads--are prohibited. PRICING PRODUCT The United Kingdom represents a strongly competitive market with high receptivity to U.S. goods. When pricing product for sale in the United Kingdom, U.S. exporters need to be aware of some additional costs which could reduce profit margins below those available in the United States. A value-added tax of 17.5 percent is charged on the majority of goods sold in the United Kingdom (with food and children's clothes the major exceptions). In addition, imported goods may be subject to customs duty. The costs of transportation, freight forwarding and customs brokerage charges will further diminish margins, as will commissions to agents and distributors. UK retailers have tended to demand higher profit margins than those in the United States. However, increased competition from large European and U.S. chains, as well as the arrival of warehouse clubs, are beginning to eliminate excessive profits. SALES SERVICE/CUSTOMER SUPPORT As an advanced economy, the United Kingdom offers a full array of sales and customer support services. Advice on accessing these may be obtained from the Foreign Commercial Service at the American Embassy. A full array of market research services is available. In addition, the American Embassy in London provides periodic economic and financial country data, as well as market research reports and timely business information bulletins. These data may be accessed on the National Trade Data Base (NTDB), a CD-ROM which is widely available throughout the United States in major libraries, or through subscription. For more information, write to the U.S. Department of Commerce, Office of Business Analysis, HCHB Room 4885, Washington, DC 20230, Tel: (202) 482-1986. SELLING TO THE GOVERNMENT The UK government adheres to a general policy of "best value for money" in public procurements. In both central and local government, there is a strong trend towards "out-sourcing" of services previously provided in-house. Most government departments are subject to the GATT MTN Procurement Code. This requires that tenders for public procurement over a specified value threshold must be advertised in a timely manner, and that bidders from GATT signatory countries should be given non-discriminatory treatment. Urgency or national security reasons can be used to justify procurements outside GATT rules. Certain industries, notably telecommunications and transport, are exempted from the MTN Procurement Code. The 1993 US-EU agreement on reciprocal market access in the electrical utilities sector has paved the way for further market access liberalization. Since Great Britain has no official journal, procurement intentions are published in the EU Official Journal. In addition, trade publications and specialist bulletins are used to advertise future tenders for the procurement of equipment, works, or services that are industry- specific. Such tender announcements supplement EU Official Journal entries, they do not substitute for them. The UK MoD prefers a direct commercial sales approach for its major defense acquisition programs. Its acquisition policy is competitive "firm fixed price" contracting, wherever possible. Rarely will it fund developmental costs for a program. The majority of its requirements are focused on off-the-shelf purchases, which often require contractor development. This approach entails selecting a single prime contractor who will accept all program risk (including development risks for adapting off-the-shelf technology to meet the operational requirement). The MoD's policy is to amortize this cost over the production run of the system. Many of these contracts include industry provided training infrastructure, ammunition, parts and maintenance support, development testing, and various performance guarantees. The MoD publishes a biweekly digest called the MoD Contracts Bulletin. The bulletin contains information of possible future purchases, competitive contracts awarded, single-source contracts awarded, and prime contractor sub-contracts requirements. It is available to U.S. contractor subscribers. The American Embassy also utilizes the Commerce Trade Opportunities Program (TOP) to advertise pertinent information in the Commerce Business Daily. The growing UK health care market is dominated by the state-run National Health Service (NHS). Procurement is the responsibility of several Regional Health Authorites, each of which takes the lead in procuring a range of products and services for the entire NHS. PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT UK intellectual property rights laws are strict, comprehensive, rigorously enforced and conform to the harmonized approach to IPR adopted by the EU. The UK's IPR positions in international fora, such as the World International Patent Organization (WIPO) and GATT negotiations, parallel those of the United States. The UK has legislation also in effect for the protection of patents, trademarks, and industrial designs. The British Patent Office is responsible for the administration of the Patent Acts, the Registered Designs Act, and for dealing with issues related to the Copyright Acts. The United Kingdom is a member of the "Paris Union" International Convention for the Protection of Industrial Property (1958 Revision). Recent UK copyright law is designed to make copyrighting a more simplified, user-friendly procedure and has permitted the United Kingdom to join the Berne Convention. Implementation by the United Kingdom of the 1989 EU Trademark Directive, which will establish a unitary trademark system for the European Union, will make it easier for UK trademark holders to obtain protection in other countries. The UK's ratification of the the Madrid Protocol on the international registration of marks will enable trademarks to be registered in all signatory countries with a single application. Until the EU's Trademark Office is opened in Allicante, Spain in mid-1995, EU trademarks will be registered on a national basis. A Single European Patent, valid throughout the EU, does not yet exist, since the Community Patent Convention has been ratified only by Germany and Greece. Applications for patents and for design protection in the United Kingdom should be filed with the Comptroller, The British Patent Office (BPO), 25 Southampton Buildings, Chancery Lane, London, WC2. Trademark applications should be filed with the Registrar, The Patent Office, Trade Marks Registry, also at the above address. Private professional advice is normally provided by patent or trademark agents. The Chartered Institute of Patent Agents, located at Staple Inn Buildings, High Holborn, London WC1V 7PZ telephone: (44-71) 405-9450, maintains a list of patent agents. The Institute of Trade Mark Agents, at Suite 3-5, Panther House, 38 Mount Pleasant, London WC1X 0AP (telephone: (44-71) 833-0875), does the same for trademarks agents. Some attorneys have a significant practice in trademark law, but it is not a legal specialty that many handle on a regular basis. Most attorneys will consult a trademark or patent attorney when necessary, but it is often easier for firms to deal directly with a patent or trademark agent. Patents: Under UK law, three kinds of patents are granted. These include basic patents, patents of addition, and secret patents. Basic patents are issued on new inventions and discoveries for a period of 16 years from the date of application and are renewable for 5 or 10-year periods. Patent applicants first file a request for the granting of a patent that protects the patent for the first year. The protection ends unless a "request for search" is filed. The third step is the applicant's request for "substantive examination." The granting of patents is usually completed in less than four years from the initial filing date. There are prescribed fees for each step of the process and for annual renewal of the patent. The patentee must work the invention commercially within three years after issue of the patent; otherwise, a compulsory license may be ordered. Compulsory licenses can be granted to prevent abuse of a monopoly position. Special compulsory licensing applies to the pharmaceutical sector. Patentees may elect to grant "licenses of right" under which they permit any interested person to work the invention upon payment of royalties. Revocation of a patent is possible two years after issuance if it is still not properly worked. The United Kingdom is a signatory to the International Patent Cooperation Treaty (IPCT). Under the IPCT, an inventor may file a single patent application with the BPO, which will then stake a claim in 49 other countries, including 15 European nations and all the major industrial nations. Thirty months after filing, if the examination report is favorable, the inventor must file separate applications and translations in the individual countries. Industrial Designs: Industrial designs can be registered and protected for five years from the date the application is filed. Registration is renewable for two terms of five years each. The same design may be registered for more than one article. Non-use of a design will not cause its registration to be cancelled, but a compulsory license can be ordered if the design may also be subjected to secrecy restrictions similar to those enforced on patents for national security purposes. Trademarks: The first user of a mark is entitled to its registration. Trademarks are registered for 7 years from the date of application and are renewable for periods of 14 years each. Applications should be filed with the Registrar, The Patent Office, Trade Marks Registry, at the address given earlier for the Patent Office. The Trade Marks Register is divided into two parts (A and B). Graduated fees are charged for the application, registration, and renewal. To qualify for part A, which offers better protection, a trademark must be distinctive of the goods of the proprietor so that it will distinguish those goods from those of others. The validity of trademark registration in part A is considered conclusive seven years after its registration. The purpose of part B is to permit the registration of trademarks that are not inherently distinctive but may become so eventually after use. The law provides for removal of a trademark if the applicant has no intention of using it or if it has not otherwise been used continuously for five years. Copyrights: Both the United Kingdom and the United States are signatories of the Universal Copyright Convention. This convention affords mutual copyright protection. Copyrights are granted in the United Kingdom for the life of the author and for 50 years after his death, subject in the latter period to licensing stipulations. Any one member state is able to grant protection which is applicable throughout the EU. In 1986, the United Kingdom began to provide protection for service marks, a form of trademark, where a particular product or service is associated with a particular trading entity. Both service marks and trademarks have to be examined for compliance with three basic principles of trademark law: whether it is distinctive, not deceptive, and does not conflict with another mark. Trademark protection is available for almost any word or symbol that can have the attribute of becoming exclusive if sufficiently used. Certain words and marks cannot be registered simply because they are laudatory or are used in the industry to describe goods or services. For example, words and symbols that cannot be registered are those such as "best" for a particular product or service, a crossed fork and knife for a restaurant, or a money symbol for a bank. Well-known geographical locations are not registrable even though they may have become distinctive of a particular company's products. This rule, though, may be differently applied to services. The "Virginia" restaurant may be registrable, for example, while "Virginia" cookies would not. A mark can acquire distinctiveness after considerable use. Examples include very common surnames which are recognized by the public in connection with specific businesses. A rough test for distinctiveness is whether competitors inherently would want to use the word or symbol as part of their business. A mark can not be deceptive and may not imply that the business is other than what the trademark indicates. The final requirement is that the mark not belong to another person or company. There cannot be a prior registration for the same product or service for the same, or very similar, mark. The phrase "the same goods or services" is important. In the United Kingdom, a trademark is registered for a specific statement of goods in one of a number of classes. Goods and services have been classified by an international system into over 40 classes ranging from live animals to machinery, to services such as banking, insurance, and finance. UK registration for one class does not prevent use in another class. If a company has far ranging activities, each class of activity will need to be protected. NEED FOR A LOCAL ATTORNEY Circumstances in which an attorney would be necessary are very similar to those in the United States. Many large U.S. law firms maintain branches in London or work in cooperation with local British lawyers.