Vertex Law

What Intellectual Property Rights Can Give a Business?

by Pete Kenyon

Regardless of what products your business makes, what services it provides, its size or its sector, it is highly likely that you will be using and creating a number of intellectual property (IP) rights.

Businesses are becoming increasingly aware of the commercial value that IP rights can bring, not just in order to create a competitive advantage, but also to protect the business’ brand, to generate income (through commercialisation by way of licence and assignment), to enhance the business’ value in the event of an investment, acquisition or merger and as security for loans. In order to fully understand and extract the maximum value from your IP rights it is important to adequately protect, manage and enforce them.

Consider what IP your business may have; remember some IP is automatically protected by law (such as artistic and literary works through copyright and confidential information through the protection of undisclosed information). However, where your IP meets certain criteria it is also possible to legally protect them by registration: innovative products and processes can be protected by patent registration; creative designs through design right registration; and distinctive marks, colours and words through trademark registration.

Legal protection of your IP turns intangible assets into exclusive property rights (which cannot be commercialised or used without your consent), albeit for a limited time which varies depending on the rights concerned. Failure to protect your IP rights can in some circumstances allow others to freely and legally use them without limitation, running the risk of competitors taking advantage of them, and reducing the licensing, selling or transferring opportunities, impacting potential income and investment benefits.

In terms of managing IP, whether through the introduction of policies, business plans or marketing programmes, businesses are becoming acutely aware that a well-managed IP portfolio is vital for potential investments and acquisitions. Potential investors will want to see that there is a demand for your product in the market place, that your product is superior to competing products and that you have taken the necessary steps to avoid competitors ‘free-riding’ on your success.

In order to effectively manage IP portfolios, many businesses, particularly those in knowledge-intensive or highly innovative sectors, have begun to undertake regular technology and IP audits. These can help identify what IP exists, which can then be followed by a process to perfect the IP, making sure that where necessary it is registered and to make sure that the IP is owned by the correct entity. 

Monitoring and valuing your business’ IP assets can be achieved through introducing strategies on acquisition, exploitation, monitoring and enforcement of IP within your business. These should help you: assess the costs, benefits and market opportunities when acquiring IP in order to increase the value of your business; commercialise your IP through licensing, franchising, selling or joint ventures to increase your cash flow; effectively monitor technical developments, new licensing partners, suppliers and new competitors’ activities; and identify possible infringers and whether or not to take action against such infringement.

A successful marketing strategy should establish a clear link between your products or services and your business, differentiating them from your competitors’ and making them easily recognisable. Doing this and using your IP rights (and asserting your ownership of them) in your advertisements and promotional activities, can help your business build a reputation and create a positive image in the minds of existing (and potential) customers.

As well as the traditional methods of commercialising IP it is becoming more common for IP to be used as security for finance, either through a legal mortgage or through a fixed or floating charge. Remember that IP is intangible and IP specific to a particular industry may be of high value to a borrower, but of little value to the lender who does not trade in that industry. However, ensuring you have a protected and well-managed IP portfolio, which demonstrates the value of your IP does without doubt have the potential to boost investment opportunities for you and your business.

One last but crucial point is to consider the benefit of ownership of IP by group holding companies. This can help to protect the valuable IP from trading risk and with a straight forward licensing model can still enable the use of the IP throughout the group as required.

DISCLAIMER

The material in this article has been written for the purpose of giving a general overview of the law in this area and is not intended to be relied upon as specific advice.

For more about Intellectual Property Rights, contact: Pete Kenyon at Vertex Law on 01732 224000 or Pete.kenyon@vertexlaw.co.uk