It’s axiomatic that small business owners need to be expert jugglers but, in my experience, there’s one ball that tends to be dropped or not picked up at all – intellectual property (IP).
You may think that IP is not important to your business or that you don’t have any. But is this really the case? It has been estimated that 80 per cent of business valuations are based on intangible assets so, if managed properly, your IP can contribute significantly to your commercial success.
There are essentially four main types of IP that need to be considered when looking at the assets of your business, These are:
A trade mark registration should be seen as vital insurance in preserving your most important asset – your brand. Registered trade marks are important because, aside from adding value to your business, they can be turned into money making tools via licensing their use by other parties. It is much easier to control and manage the licensing of registered trade marks as opposed to unregistered rights.
In terms of due diligence exercises, many companies will not invest in or look to purchase a business that has no registered trade mark rights in place. Without registration, a business has to rely on unregistered trade mark rights and any reputation that can be proven through use. This can be ambiguous, difficult and expensive if proof has to be established via a court ruling.
If the trade mark is available, whilst not obligatory, it is strongly advisable to secure registered protection, given the added value and security this provides a business against third parties.
Imagine a scenario where a third party registers an identical trade mark to your business for the same kind of services. Unless you can demonstrate a significant earlier reputation through use, you may be forced to re-brand. In short, preserving brand position is a commercial imperative.
Industrial Design Right (IDR)
An IDR protects the visual appearance of an object rather than the way an object works. It could involve, for example, the shape of a product such as a chair design or the configuration or composition of a pattern or colour. Design rights can be both registered and unregistered. Unregistered rights have a shorter period of protection and protection is limited. For a design to be registered and secure a longer period of protection with broader rights against third parties, it must be new and have ‘individual character’ so as to be different to the appearance of products already on the market.
IDR protection is particularly important in certain industries such as fashion and furniture where copying of designs is a constant problem. Any IP protection that is registered will be an intangible asset of a business and will hold value.
Copyright protection covers many forms of ‘literary’ works (including instruction manuals and computer programs), musical works and ‘artistic’ works (including architecture, technical drawings, diagrams and maps). Copyright subsists automatically on creation of the work and can be commercially valuable in preventing your competitors copying your creative output.
A patent prevents other parties from making, using, selling or importing the patented articles or using the patented process without the patentee’s consent. This may provide you with a significant commercial advantage over your competitors. Alternatively, you can licence a patent to one or more third parties, thus providing you with a royalty income.
Compared to other forms of IP, obtaining patent protection can be expensive. So the key questions that any business should ask itself when considering whether to apply for patent protection are (a) how can it exploit the patent and (b) does it have the will and, crucially, the resources to enforce the patent?
If exploitation is unlikely and enforcement is prohibitive then, ultimately, a patent is of questionable value to the business.
A further issue that needs to be addressed is whether an invention can be kept secret. If this is the case – and the invention cannot be reversed-engineered – you may consider this to be the best way of protecting your IP. If you are successful in keeping the knowledge secret, it can last for as long as the invention is in use.
This can be attractive compared to securing a patent which not only has to disclose the invention but which also has a finite, 20-year shelf-life. The obvious downside to relying on secrecy is that if the invention is disclosed, you can do very little to prevent others exploiting it.
So if you’re ready to start juggling the IP ‘ball’, where should you go for some training? It may be appropriate to have a preliminary chat with a patent attorney, but I’d also recommend having a look at the website of the Intellectual Property Office.
The 2011 government-sponsored Hargreaves Review, which examined the links between IP and business growth, highlighted problems faced by small businesses in managing and exploiting their IP. The government has responded with a number of initiatives designed to tackle these problems. You’ll be the judge as to whether they’ve got it right!