Relationships with your Competitors and the Marketplace - What Exactly is IP and Why Do I Need it?

Posted by Malcolm Campbell on 18 August 2016
Relationships with your Competitors and the Marketplace - What Exactly is IP and Why Do I Need it?

In today’s increasingly competitive business environment, the value of a business is often directly linked to their level of innovation and how they protect and monopolise that innovation. The most effective way of doing this is through obtaining and then enforcing their intellectual property (IP) rights.

But what exactly is IP? What forms does it come in and how do you obtain it?

The World Intellectual Property Organization (WIPO) explain IP as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce”. IP is a part of what are called intangible assets, which can also include goodwill and brand equity.  It’s what sets you apart from your competitors and helps you stand out in the Market Place.

Whilst that might all sound a bit theoretical or idealistic, consider this; in 1988 Philip Morris & Co Ltd bought out Kraft Foods Inc for $12.9 billion, but the tangible assets in Kraft were only $1.3 billion (10 percent of the total purchase price). The “other” assets were valued at $11.6 billion. These “other assets” were things such as ‘brand equity’, ‘goodwill’ or the ‘creativity of an organisation’s people’. This is a tough concept for many business owners who devote most of their efforts in managing the other 10% of their businesses. Innovative ideas, rather than bricks & mortar, are the main source of income for a growing proportion of businesses. Even in sectors where traditional production techniques remain dominant, continuous innovation and endless creativity are becoming the keys to greater competitiveness in increasingly competitive markets. Intangible assets, particularly IP are therefore becoming more important than ever.

IP is an asset and should be managed as such. There are multiple types of IP such as patents, trade marks, copyright and confidential information, all of which are different legal tools designed for different purposes. In order to best identify, secure and protect a business’ IP you must consider all types of IP that are available. This is the only way to ensure you are getting all of the right types of protection and ultimately extracting the most value from your business.

When considering what IP rights may be relevant to your business ask yourself these kinds of questions:

  • What am I trying to accomplish in my business and will IP help me do this?

  • What type of IP rights do I have or should I obtain?

  • What will the chosen type of IP protection help me accomplish?

  • How do I and have I secured the chosen type of IP?

Once you have answered those questions a simple IP strategy can be built around those answers. The strategy is simply a plan, which should be consistent with (and assist) the business’ goals. The plan should focus on acquiring the right type of IP assets and leveraging the most value from those IP assets.

There are usually drafting, filing, prosecution and maintenance costs associated with acquiring and managing IP and as such a business should consider what their return on investment is for any money spent on IP, and take into account any cash-flow management issues.

However, IP assets should also be considered from a long-term point of view. For example, if your exit strategy includes the sale of your business in order to attract the best price for the business any savvy purchaser will want to be very comfortable that you have obtained and then routinely enforced your IP rights. If you cannot establish that you have done so over a long period of time it will negatively impact the perceived value of your business as the purchaser will be concerned that they will not be able to monopolise and leverage the most value from the business.

Getting your IP strategy right, including identifying, securing and protecting your businesses IP rights is becoming increasingly important to ensure the success of your business. We have years of experience in helping businesses manage their IP strategy in an efficient and cost effective manner. We specialise in providing clarity and confidence to business operators in all of their legal relationships – contact us today to discuss your legal needs or that of your clients.