Back to basics
Hello everyone,As a reader of this newsletter, are you feeling IP savvy yet? If not, don't worry - you're in good company. Intellectual property (IP) can be a tricky subject, but it's important to understand its impact on your business valuation. After all, a business is only as valuable as its assets, and your IP is a major part of that. In this week’s newsletter, we’re going to take it back to the basics, for those who are newer around here – so that everyone can benefit from a bit of a boost as it relates to their IP – and ultimately its value on their bottom line.
Going back to basics
So, what exactly is IP and why does it matter? IP refers to creations of the mind, such as inventions, literary and artistic works, symbols, names, and images used in commerce. It's the thing that sets your business apart and gives it value, so it's important to protect it. (This is where IP law firms such as Virtuoso Legal come in.) Here's a fun fact: did you know that IP can account for up to 80% of a business's value? Yes, you heard that right! That's why it's important to understand the impact of IP on your business valuation, so you can make informed decisions and ensure your business maximises the value of its intangible assets. Of course, like any inventory, IP is only as valuable as it is ringfenced and protected. As it is intangible, many make the mistake that because IP is somewhat “invisible”, they don’t do what is required to claim and “lock up” the value in their business. This kind of approach leads to some nasty surprises down the line. It is basically the same as leaving the boardroom offices and warehouses unlocked for anyone to come in (including competitors) to take whatever they might find useful. A lot of this comes down to the fact that many don’t really comprehend the value of their IP until it becomes clear when something goes wrong… But learning from putting your hand on the stove, so to speak, can run the risk of significant damage before appropriate protections are put in place. It might mean that your claim to a unique design or invention is lost, an ex-employee sets up a business using knowledge and expertise that hadn’t been protected in the business, or someone claims a brand on which you have established your reputation - because you hadn’t registered it. It is much better to be ahead of the curve on this, believe me! So, what can you do to protect your IP and increase its value? Here are a few tips and tricks to get you started if you’re at square one:
A trade mark is a symbol, name, or other distinctive feature that identifies a business's goods or services. Registering your trade mark will give you exclusive rights to use it and as you build a reputation in your marketplace, it becomes something that people look out for and actively seek out when making purchasing decisions. Registering a trade mark (which isn’t even that expensive, done properly) means that no one else can come close to your look and feel – and when you’re flying high this means that anything with your brand on it flies off the shelves. It is important to think of and develop a distinct brand that stands out in the marketplace – and then protect it in such a way that no one else can come close. If you do this then you will find that, when reviewing the metaphorical shopping shelf, the buying public are drawn to your business as it stands out. As above, if you then also build a reputation for providing excellent goods and services, this recognisability will serve you in drawing customers and clients back time and time again. And if that isn’t something that is worth taking the time to invest in and get right – I don’t know what is! Registering trade marks, and the strategy and advice that goes behind it to make truly distinct and solid international brands is a particular strength of our firm. Do get in touch if you want to have a chat about how we can help you get it right.
A patent is a legal monopoly for a specific invention. If you have a unique product or process, consider applying for a patent. This will give you the exclusive right to make, use, and sell the invention for a certain period. Patents are probably the most widely known and understood form of intellectual property right, but what a lot of people don’t know about patents is that:
- they can take a long time to get registered;
- they are possibly the most expensive form of intellectual property to register; and,
- you will find it more difficult (or even impossible) to register a patent for anything that has been made somewhat public (i.e., shown off at trade shows, etc.)
The process of patenting an invention is a complicated one which needs to be handled with care… but on the flip side, once a patent is registered it offers a very strong protection over an invention – essentially a hard monopoly on the use of the invention, with anyone else compelled to pay to make use of the technology.Examples of companies who are very successful in the technology space, make massive amounts of revenue from patent licensing, even if they themselves are not necessarily manufacturing the technology (think Samsung being paid for patented technology in iPhones and so on). If you’re innovating big in the technology space, patents are very much worth exploring – but beware of how competitors might circumvent the patent. Good advice here is paramount, and whilst we don’t register patents at Virtuoso Legal, we know some fantastic patent attorneys who can help you.
Copyright protects literary and artistic works, such as books, music, and software. It is automatic and comes into existence at the point where an original creative work is made. Most businesses are creating huge amounts of copyright material, year on year, perhaps entirely unbeknownst to them! Ultimately, copyright provisions mean that if you can prove that someone else has taken your original creative works (e.g., a database, web content, video, music, etc.) and copied it – that you can enforce against them via a copyright claim. What a lot of businesses fail to do, however, is:
- educate their employees about copyright;
- ensure that copyright created by third parties is assigned to the business (e.g., websites and media created by freelancers);
- document the creation of key copyright works;
- notify the wider public that you consider key creative outputs copyright protected; and,
- monitor and enforce against third parties making unauthorized use of your copyright materials.
In many ways copyright is very simple, in other ways it is complex in terms of how it operates in a business and how practices and procedures should be integrated into business operations.Whilst an individual photo, contact list or blog may not be the most valuable asset in a business – cumulatively it all adds up, and having a systematic grasp on how it is kept safe from being copied is what keeps so much of a business unique. For businesses in the creative sector, it is an absolute must to get right. If you want to talk more about this, do not hesitate to get in touch with us.
Trade secrets typically consist of confidential information that gives a business a competitive advantage. This can include anything from recipes, systems, methods, business plans and more. Ultimately material that a business would look to protect under trade secrets provisions are the kinds of information, expertise or knowledge that, if fallen into the wrong hands, would be significantly detrimental to the business. In essence, protections around trade secrets mean that if someone gains unauthorized access and makes it public or uses it – you have post-hoc legal recourse to seek damages. The only requirement on the side of the business is to have provisions in place to make sure that material is kept as a trade secret – meeting criteria of restrictions to access and awareness in the company of how it is handled. For many companies, trade secrets are a good way of protecting something when it is not appropriate to pursue registering a patent. Famous examples of trade secrets include KFC’s “original recipe” herbs and spices and the formula for WD-40. Whilst these are possibly identifiable via reverse engineering, they are largely kept as secrets which underpin the success of their key products. In many ways, trade secrets are more about keeping something within an organization under wraps, albeit to a specific legal standard to be enforceable. Again, if this is something that you think may be relevant to you, let us know and we can point you in the right direction.
Finally, those that have their IP well and truly wrapped up often find themselves benefiting financially from franchising and licensing. Licensing allows you to use IP from another company in exchange for payment and vice versa. This can increase the value of your business by giving you access to a wider range of IP; and indeed, become an incredibly valuable source of revenue coming in. Consider the following options:
- Agreeing with another company for a license to use your brand in exchange for a percentage of revenue. Essentially, benefiting from another business’ productivity whilst they gain the benefit of your established reputation,
- Licensing an invention or design to others in the marketplace, in exchange for a fee or a percentage of revenue derived from sales,
- Licensing copyright works, whether it’s: a content library, educational assets, valuable creative works or anything else created through the course of business
Many businesses that we assist utilize licensing agreements to expand internationally, licensing key IP to international partners – and ultimately unlocking a host of new revenue streams. Key to successful licensing is to have valuable, clearly defined and legally protected IP; as well as carefully composed licensing agreements.As such, this usually follows the previous steps – but it is something that you might consider a bit of a “carrot on a stick” for getting the fundamentals right in the first instance! If this is something that you would like to discuss, I would be more than happy to explain how your business could benefit from expanding via licensing and franchising.
Ultimately, one of the most important things to keep in mind is that IP is an asset, so it's important to keep it in good condition. That means making sure you have the proper protection in place, and taking steps to enforce your rights if necessary. Finally, it's important to keep track of your IP and regularly assess its value. This will help you make informed decisions and ensure that your business is worth as much as it should be. Remember, a business is only as valuable as its assets, so make sure your IP is protected and working hard for you. As always, if you have any questions or need help with your IP, don't hesitate to reach out. We're here to help! Just click the button below to get in touch. Have a great week, Liz