Why intellectual property (IP) is good for business.
26 April marked World Intellectual Property Day. This year’s theme will explore how the IP system supports innovation by attracting investment, rewarding creators, encouraging them to develop their ideas and ensuring that new knowledge is freely available so tomorrow’s innovators can build on today’s technology.
In today’s knowledge-based economy, intangible assets such as brands, innovative products and services, trade secrets, inventions and the look of a product, can in many cases represent the significant assets of a business.
In order for a business to survive and grow in what is a highly competitive market place, IP rights can play a crucial role in protecting and exploiting their competitive market advantage. For this reason, IP can account for a large proportion of the value of a business and will impact on nearly every business. Quite often however, businesses do not realise they own or use any IP, believing IP only relates to inventions. It is only when they learn that IP can cover names, logos, web sites, photos, brochures and so on, that they begin to understand its importance.
IP: the facts In its most basic terms, IP relates to any form of original creation – a new invention, a unique pattern or drawing, a brand. It is an intangible asset which is playing an increasingly significant role in the plans of businesses for their future sustainability and growth.
There are four main types of IP:
Patents – which protect the processes that make things work, what they’re made of and how they’re made
Trade Marks – a sign (for example a word, logo or slogan) which distinguishes your goods and services from those of your competitors (your brand)
Designs – which protect the visual appearance of a product, including the colour, shape, texture, material and ornamentation
Copyright – which protects written or recorded creative and artistic material, including websites, photographs, music, literature and advertising materials
In addition to this, IP also includes trade secrets and protected geographical indications (which protects products with a quality, reputation or another characteristic attributed to a specific area).
Whether you’re a seasoned professional or stepping into the realms of IP for the first time, it can feel daunting to discuss this important (and often overlooked) area of business with a client. To help, here are some top dos and don’ts to advise clients and prevent them from falling into the most common IP traps.
Encourage your client to consider IP from day one – ensure they research their ideas thoroughly before proceeding
Have your client consult an IP attorney/professional every step of the way
Ensure your client registers their brand as a trade mark
Make sure your client’s employee contracts state that all IP created is owned by the company
Instruct your client to create agreements with commissioned parties to establish the ownership of IP (e.g. transferring the copyright of your website to your business)
Warn your client to keep new and innovative ideas out of the public domain and ensure all employees are aware of the importance of confidentiality
Assume IP isn’t relevant to your client – every business owns or uses some form of IP no matter the industry or area that they trade in
Allow clients to trade off the back of other people’s trade marks as this could result in costly legal proceedings
Permit your client from copying the work of others without gaining the required permissions or licences
Wait until your client’s business is established and successful before advising them to register their IP as it may be too late
Think a behaviour is legal because ‘it’s what others do’ – they may be breaking the law
Mistake the use of something online as proof of ownership
Where to start
A Basic IP audit An IP audit is review of the intellectual property assets owned or used by a business. It should also provide information on:
The registered and unregistered rights held by the business
Who actually owns the rights
How those rights are used
Any potential infringements of third party rights
Agreements with third parties with implications on the businesses IP
What actions need to be taken to best meet the businesses objective’s
Any rights which could be exploited or further exploited
Making money from IP In addition to the significant protection that IP rights offer, businesses can also benefit from exploiting them in a number of ways. This could be through licensing opportunities, adding value in the event of the sale of their business and when approaching venture capitalists for funding.
One of the main obstacles businesses think they face when protecting their IP is the cost. Contrary to popular belief, this isn’t necessarily the case and often it’s their limited knowledge of IP which prevents them taking this step. Applying for a registered trade mark costs from as little as £170, while registered design applications start at £60.
Having said this, applying for a patent can be a lengthy and costly process for a business to undertake. Although, while filing a patent may be costly at the outset, it can offer financial gains once granted.
Businesses who own granted patents may be able to benefit from Patent Box. HMRC’s Patent Box scheme began in April 2013 and offers an additional incentive for companies to retain and commercialise existing patents and to develop new, innovative patented products. It allows a business to apply a lower rate of corporation tax to any profits earned from patents. Businesses with patentable technology can also benefit from R&D Tax Credits and there is evidence to suggest that it is under claimed.
Of course, it’s not advisable to insist businesses apply for a patent simply to take advantage of these financial incentives. It should be carefully considered as part of a company’s business plan. If they understand the cost in comparison to the potential income it could generate and can realistically visualise the outcomes of this investment, they should be encouraged to seek advice from a Patent Attorney or IP professional.
Going global In today’s global economy IP can provide a great way of building an international business. If your client plans on selling, distributing, manufacturing or commissioning third parties to produce products abroad, protecting those IP rights should be considered beforehand. Information on protecting your IP abroad can be found here
IP insurance In order to protect businesses from the potential cost of resolving IP disputes, the insurance industry is now offering a number of affordable ‘before the event’ legal expense insurances (BTE LEI). BTE LEI can help protect your client’s financial assets in the event of litigation, although in the first instance, the insurance can act as an effective deterrent to infringement. Evidence also suggests that BTE LEI is also impacting positively on businesses’ ability to secure financial investment. More information and a database of providers can be found on the websites of the Chartered Institute of Patent Attorneys (CIPA), the Chartered Institute of Trade Mark Attorneys (CITMA) and the IPO.
Mergers and acquisitions(M&A) IP can play a pivotal role in the legal due diligence process. More than this, other due diligence may provide the buyer for example with an overall picture of the seller’s IP assets. This can also indicate how the IP will impact on the seller’s proposed growth strategy. This in turn can show how the buyer may be able to improve this position going forward.
IP Equip The IPO is aware that many professionals aren’t confident in their understanding of IP rights. To address this they have designed IP Equip, an online learning tool to help you understand the basics of IP. The course is free to complete and can be accessed via desktops, tablets and smartphones. It’s also CPD accredited.
IP Equip is just one of the free online tools available as part of the ‘IP for Business’ support toolkit. More information and access to the tool is available online here and here
David Hopkins – business engagement manager, Intellectual Property Office