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Intellectual property (IP) is a great investment for businesses of all sizes and in all sectors. In this article we will explore 5 key reasons to invest in your intellectual property.
IP assets represent the bulk of the market value of most businesses, which surprises many people. It is estimated that for most businesses, over 60% of the market value is in the form of IP, which may be a combination of registered IP, such as patents, trade marks and registered designs, and non-registered rights, such as goodwill and brand awareness. For brand- or tech-heavy businesses, IP can represent almost all the value of the business.
Unlike other business assets, intellectual property has no fixed value, nor is it pegged to any market rate and as your business grows and awareness of your brands, products or services increases, so will the value of your intellectual property.
Having legal protection for your inventions, trade marks and designs should be hard-wired into your business plans.
Investing in your patent portfolio provides you with the right to exclude others from using your inventions and can also create direct revenue through licensing and sale of your patents, for example in territories where you are not active, or in relation to “surplus” patents that you no longer require. For technology-heavy businesses, patent rights are almost always a pre-requisite before major investors will consider providing funding.
A registered trade mark protects the value of your brands and can considerably increase the value of your business, especially if you are considering selling it, or floating the business on a stock exchange. It is also a great tool in anti-counterfeiting measures.
Registered designs can be used to prevent competitors copying your product designs (even parts of your products), and ensures that competitors cannot simply ride on your iconic or consumer-preferred designs, and must spend their own time and resources developing alternatives.
Your intellectual property assets can be leveraged, for example through licensing agreements, which can return significant profit.
Licensing of IP can be territory-specific or product/technology-specific, i.e., you can license your IP in countries where you do not operate or in respect of product areas/technologies that are not part of your core business. Read more about licensing in our article 5 things to know about licensing your IP.
IP can also be sold, like any other asset, and the price will depend on many factors, including demand, costs involved in developing the IP, longevity of the IP etc. This can be particularly useful for “surplus” IP that you no longer need, perhaps due to a change in business direction, but for which there is still a demand.
You can also leverage your intellectual property when selling a business, or it can be used as an asset against borrowing from banks, investors, and other finance providers, which may be particularly useful when expansion of your business requires significant cash investment from third parties.
Trade marks are an essential asset for every business. Obtaining protection for a trade mark in the UK and Europe is a quick and easy process. Trade mark protection is also relatively inexpensive considering protection for a registered trade mark lasts for ten years and can be renewed indefinitely.
Registered designs are just as quick and easy as trade marks to obtain in the UK and Europe, and last for an initial period of 5 years, which can be renewed in 5-year chunks for up to 25 years. Registered designs have been used to force competitors to remove entire product lines, and prevent cheap imports from around the globe, for relatively little cost, and so their potential value is huge.
Whilst obtaining patent protection is much more expensive than its other registered intellectual property counterparts, the payoff for having a valid and enforceable patent can be huge. Having a valid patent can ensure a huge financial or competitive advantage within a particular market for the duration of your patent’s life. A patent on a key breakthrough or breakout technology can be the making of a business, and ensure that consumers choose your patent protected product over your competitors – and without patent protection, your competitors could simply copy the technology without challenge
Additionally, tax relief may be available through the Patent Box scheme for any product sold which incorporates a patented invention.
Unfortunately, intellectual property is sometimes not considered as important as it should be and businesses may neglect to protect its intellectual property in the early days (it is, after all, another expense among many for fledgling and established businesses alike). This can cause considerable problems in the future as most patent and trade mark systems operate on a first-to-file basis, and patents need to be filed before you sell or publicise your inventions. Not protecting your brands and technology can also be deal-breaker with potential investors.
A business that is seen to invest in its inventions and its brand early on is immediately considered more commercially savvy, a worthy partner and a good investment. It also shows belief in your technology and/or brands, proving to investors, the media and relevant trade circles that you are confident of your business position, your ability to grow and your ability to fend-off competitors and stand out in the market.
Contact us today to discuss protecting your intellectual property.