It is common currency that intellectual property (IP) is an important and valuable asset of any business, including start-ups. But that is easily said. What does it mean in practice and how can you ensure your IP is working for your business? There are 5 key considerations to bear in mind when starting out on your IP journey. But first let’s take a look at what we mean by IP.
What is IP?
IP is described as an “intangible asset”. That means that it does not have physical form, compared say to a desk or even an employee. It is an asset that exists only on paper because of the effect of our statutory or common law. But is nevertheless a form of property. Like land it can be sold, rented and mortgaged. It has the potential, therefore, of being able to generate revenue for a business, albeit sometimes indirectly. Like land, its value depends on its quality.
IP sometimes gets bad press, because it can generate monopoly rights. What is often forgotten, however, is that IP rights exist to protect your effort and expenditure (in time and money) in innovating new ideas and creating new works. The IP system allows you to benefit, usually for a time limited period of time, from your innovations and creations to the wider benefit of the public, whether that is creating new widgets, medicines, music, novels, art, etc.
5 top tips
To ensure your IP is working for your business you need to: understand, protect, commercialise, enforce, and defend.
For your business to start to unlock the value of its IP you first need to understand what IP covers your goods and services. As a rule of thumb:
- new technical inventions for products or methods can be protected by patents;
- the new shape of objects can be protected by designs;
- trademarks protect brands used to distinguish goods and services;
- copyright is used to protect literary (which includes computer programs), artistic and musical works, but not the ideas they express;
- database rights protect databases (which are often linked to software or websites); and
- trade secrets protect confidential information.
Patents must be registered to have effect, but you have choice with designs and trademarks whether to register or not. All of these types of IP have limited life spans, except for trademarks (provided you pay the renewal fees and use them).
Goods and services can be protected by more than one type of IP right. In fact, such a “bundle” is probably stronger than any individual element of it. For example, a software product may be afforded the following protections: the source code will be protected as a form of literary copyright if it is an original work, patents may protect some of the processes effected by the software provided they are novel, trade secrets may exist in the source code and underlying algorithms if they are confidential, trademarks can protect a brand used with the software as long as it is not descriptive, it is distinctive and it is not confusingly similar to an existing mark, database rights may protect the databases interrogated by the software, and even designs can protect novel icons used in a graphical interface.
Read our Forward: Feature String theory: how bundling IP rights strengthens bioinformatics products for another specific “bundling” example.
Once you understand the types of IP that cover your goods and services, you can put in place mechanisms to protect those IP rights. For example, by filing a patent, trademark or design applications, or by protecting the confidentiality of secret information, or by recording when copyright works are created. A few tips:
- Never publically disclose new inventions and designs. If you do so, they will not be protectable.
- Do file applications to protect your inventions if you can, in particular in those countries which are your main markets.
- Do register trademarks. Registered trademarks are much easier to enforce. They can also last for a long time. And brands are often the most valuable rights of any business.
- Be careful with your secrets. Their value depends on being careful about disclosure.
- Design right registrations are quick and cheap, but you may need to file a number of them to properly protect your shape.
- Brexit means that EU unitary rights, including most commonly trademarks and designs but also supplementary protection certifications and plant variety rights, no longer cover the UK. You will need to protect in the UK and the EU separately.
IP may be an asset, but if it does not directly or indirectly generate revenue for the business, then it becomes a liability. IP registrations require money to be spent in getting them and maintaining them. And it adds up.
IP may generate revenue directly by being licensed to third parties. But it can generate revenue indirectly in many more ways. For example, it can create a competitive or first mover advantage by excluding competing goods or services from the market place for a time. It can create brand awareness that allows you to charge a premium. It can attract outside investment. It can help secure debt. It can provide you with a degree of control over standards or access to grant funding and new partners. If you no longer need the IP, but it is valuable to someone else, it can be sold.
A hidden truth about IP is that it may need to be enforced to have value. If it cannot be reliably enforced (because the rights are weak) or you are unwilling to do so (because of the expense), then others may use the rights without permission thus eroding the revenue potential, and thus value, of that IP. The English courts have striven to address the perception that enforcing IP rights is only for those with deep pockets. For example, the IP & Enterprise Court (IPEC) is a new court specifically designed to allow cost-effective litigation, which can be attractive for smaller companies and for non-core IP enforcement. It even has a small claims track for very small matters.
Finally, sometimes you may need to defend against an allegation of IP infringement. All such actions should be taken seriously and dealt with promptly, because the remedies for infringement include not just awards of damages and legal costs, but also injunctions which will stop you from providing your goods or services.
To summarise: familiarise yourself with the IP system and integrate that understanding into your business (read more in our blog Why building and nurturing an IP culture in your business is important). By leveraging your IP rights effectively, you will be able to add value to your business!
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