Intellectual property rights protect our creativity in these areas, helping to create jobs and future prosperity.

Intellectual property (IP) is all around us. Every product or service that we use in our daily lives is usually the result of a long chain of big or small innovations, such as changes in designs, or improvements that make a product look or function the way it does today. Take the mobile telephone which has become an essential tool for any business large or small. Patent protection will have been obtained for various technical parts. Its design will likely be protected by industrial design rights. The brand name will be protected by an instantly recognisable trade mark. Advertising and promotional material as well as the instruction manual are protected by copyright.

Regardless of what product an enterprise makes or what service it provides, it is likely that it is regularly using and creating a great deal of intellectual property. For example, almost every business enterprise has a trade name and may have one or more trademarks and should consider protecting them. Many will develop creative original designs. Many will have produced, or assisted in the publication, dissemination or retailing of a copyrighted work. Some may have invented or improved a product or service.

IP in business planning

Forward-looking entrepreneurs and enterprises face the challenge of extracting the latent value of their IP and using it effectively in their business strategy. Companies, who recognise the value of their IP and dedicate time and resources to protecting and exploiting their IP assets as part of their business strategy, can increase their competitiveness in a variety of ways and in certain cases can be propelled to a leading role within a particular industry.

When drafting a business plan, consider the following IP related questions:-

  • Does your business have products and services with unique features which should be protected?
  • Can you use your IP or IP knowledge to improve the competitiveness of your business?
  • Will market trends or advances in technology affect your business, your IP and your future IP needs?
  • Are you possibly infringing IP owned by others and leaving your firm open to a costly legal action?

Completing an IP audit questionnaire can provide an additional useful framework on which to plan a business strategy or an IP licensing strategy.

A business which has recognised IP in its planning can benefit by:

  • creating a strong corporate identity and a valuable asset through a trade mark and branding strategy;
  • enhancing access to venture capital and ease access to financing for R&D, product development etc.;
  • enabling profitable licensing agreements to be entered into;
  • Preventing competitors from copying your company’s products.

A company’s intangible assets – ranging from human capital and know-how to inventions, brands, designs and other products of its intellectual creativity and innovation are today, often more valuable than a company’s physical assets. Intellectual property can be a vital ingredient in securing the commercial success of any company wishing to stay ahead of the field in creating innovative new products, expanding market share and generating customer loyalty. It is very much in the interests of business to make best use of their intangible assets by investigating the opportunities offered by the intellectual property system.

Intellectual Property as a Business Asset:

An enterprise’s assets may be broadly divided into two categories: physical assets - including buildings, machinery, financial assets and infrastructure - and intangible assets - ranging from human capital and know-how to ideas, brands, designs and other intangible fruits of a company’s creative and innovative capacity. Traditionally, physical assets have been responsible for the bulk of the value of a company, and were considered to be largely responsible for determining the competitiveness of an enterprise in the market place. In recent years, the situation has changed significantly. Increasingly, and largely as a result of the information technologies revolution and the growth of the service economy, companies are realizing that intangible assets are often becoming more valuable than their physical assets.

In short, large warehouses and factories are increasingly being replaced by powerful software and innovative ideas as the main source of income for a large and growing proportion of enterprises worldwide. And even in sectors where traditional production techniques remain dominant, continuous innovation and endless creativity are becoming the keys to greater competitiveness in fiercely competitive markets, be it domestic or international. Intangible assets are therefore taking center stage and SMEs should seek how to make best use of their intangible assets.

One crucial way of doing so is by legally protecting intangible assets and, where they meet the criteria for intellectual property protection, acquiring and maintaining IP rights. IP rights may be acquired in particular for the following categories of intangible assets:

  • Innovative products and processes (through patents and utility models);
  • Cultural, artistic and literary works including, in most countries, also for computer software and compilation of data (through copyright and related rights protection);
  • Creative designs, including textile designs (through industrial design rights);
  • Distinctive signs (mostly through protection of trademarks including collective and certification marks, but in some cases through geographical indications; see below);
  • Microchips (through protection of layout-designs or topographies of integrated circuits);
  • Denominations for goods of a given quality or reputation attributable to the geographical origin (through protection of geographical indication; and
  • Trade secrets (through protection of undisclosed information of commercial value).

Intellectual Property Protection as an Investment

Making the right investments is crucial for enhancing the market value of your SME. Investing in equipment, property, product development, marketing and research can strongly enhance your company’s financial situation by expanding its asset base and increasing future productivity. Acquiring intellectual property may have a similar effect. Markets will value your company on the basis of its assets, its current business operations and expectations of future profits. Expectations for future profit may be considerably affected by the acquisition of key patents. There are numerous examples of SMEs that have seen their market value increase overnight as a result of their acquisition of important patents in key technologies.

Similarly, a good trademark with a good reputation among consumers may also enhance your company’s current value and may decisively contribute to making your company’s products and services more attractive to consumers. Investment in developing a good IP portfolio is, therefore, much more than a defensive act against potential competitors. It is a way of increasing your company’s market value and improving future profitability.

The Value of Intellectual Property Assets

A crucial point about legal protection of intellectual property is that it turns intangible assets into exclusive property rights, albeit for a limited period of time. It enables your SME to claim ownership over its intangible assets and exploit them to their maximum potential. In short, IP protection makes intangible assets “a bit more tangible” by turning them into valuable exclusive assets that can often be traded in the market place.

If the innovative ideas, creative designs and powerful brands of your SME are not legally protected by IP rights, then these may be freely and legally used by any other enterprise without limitation. However, when they are protected by IP rights, they acquire concrete value for your enterprise as they become property rights which cannot be commercialized or used without your authorization.

Increasingly, investors, stock market brokers and financial advisors are becoming aware of this reality and have begun to value IP assets highly. Enterprises worldwide are also more and more acknowledging the value of their IP assets, and, on occasions, have included them in their balance sheets. Many enterprises, including SMEs, have begun to undertake regular technology and IP audits. In a number of cases, enterprises have realized that their IP assets are in fact worth more than their physical assets.