Author Rachel Nicholls
As IP specialists, it always surprises us that many businesses do not seem aware of the financial and commercial value of their Intellectual Property, and whereas every business has a business strategy, many do not include a dedicated IP strategy. This can often leave IP as simply an expense on the balance sheet, when in actual fact with a proper IP strategy in place, your IP can deliver a real return on investment, providing a framework for the use and exploitation of your IP.
According to a 2017 Intellectual Property Office (IPO) report, Hidden Value: A study of the UK IP valuation market, Intellectual Property (IP) makes up a significant proportion of a business’ value. Quoting research by the Brookings Institute and Ocean Tomo, the report states that more than 80% of enterprise value attributed by the stock market is based around intangible assets, and that in 2011, the UK market sector invested £137.5bn in intangible assets compared to £89.8bn in tangible assets; of this, £65.6bn – around half of intangible assets – is thought to have actual or potential protection through the use of formal intellectual property rights.
What is IP strategy?
An IP strategy is simply a considered plan for the acquisition of intellectual property, the protection of IP, including monitoring and enforcement, and a system for leveraging the most value possible from existing Intellectual Property assets through exploitation. An IP strategy should be consistent with the goals and aims of your business, and as your IP is a business asset, the value of that asset can only be determined and measured against investment through the use of a defined IP strategy.
Companies with an active IP strategy will consistently outperform their competitors, and yet many companies do not measure the performance of their IP against competitors or market leaders. Failure to have an adequate IP strategy in place can leave your business unprotected, with a much lower business value than it could achieve.
Your IP is a valuable business asset
The recent IPO report identified that in today’s “knowledge-based, innovation-driven economy, intangibles such as IP are accounting for an increasing majority of company value”. According to the report, approximately 70% of a typical company’s worth lies in intangible assets, and this percentage is steadily increasing. However, the report offers a stark warning that “although the contribution made by intangible assets is now widely acknowledged, prior research by the Intellectual Property Office and others has suggested that this value is still not visible to many business managers, raising concerns that the costs of innovation are not being appropriately balanced by a clear appreciation of the returns it produces”
Who is responsible for IP strategy?
Taking the time to put in place an effective IP strategy, involving every part of your business will overcome this problem. Involving all meaningful parts of your business, along with relevant decision makers, into the development of your IP strategy will ensure that everyone within the business is on board with the strategy, and knows the value that the strategy will have for the business. Your IP strategy should involve and consider all aspects of your business from design and marketing teams, to legal teams, to financial teams, decision makers, board members and those who hold the budgets. This is the only way that your IP strategy can really support and enhance your business goals.
4 key benefits of an effective IP strategy
- Business valuation and ROI – An effective IP strategy ensures that your IP adds to the value of your business. With more and more balance sheets including intangible assets, your IP will add significant value to your business provided that resources are put to the best use and your IP strategy is enforced. Protecting IP can sometimes seem an expensive process, however an effective IP strategy will ensure that only necessary costs are incurred, and that the value of the resulting IP rights significantly outweighs the cost, bringing an effective return on investment.
Tip! For a measurable return on investment and value analysis, consider your business structure – it may be worth setting up an IP holding company which will own your IP but licence its use back to the active entity. This way, the value of your IP assets, by way of licence fees and royalty payments is reflected on the balance sheet of the IP holding company and also on the balance sheet of the active trading company.
- Safety – Your IP strategy will ensure that your valuable assets are preserved and maintained. Your strategy will identify protections required, and will set out monitoring and enforcement protocols to ensure that not only is your IP protected, but funds are directed in the best way. An effective IP strategy, wherein new IP is detected, cleared and protected, also ensures that you are able to trade safely without fear of third party conflict, thereby protecting your other product and brand expenses and investment.
- Consistency – Ensuring that you have an IP strategy in place, and communicating that strategy throughout the business, ensures consistency in approach and the handling of IP. It means that there is no wasted expense on unnecessary protection, but that all valuable IP is identified and protected, and the entire business has a consistent and joined up approach to IP.
- Business goals – A good IP strategy should use your valuable intangible assets to support and meet the business goals. If your IP strategy does not support business goals, then it is difficult to demonstrate the value of the IP. Indeed, if the resulting IP does not assist your business in reaching your business goals, then it may be that the IP acquisition was not worth the expense, making IP simply an expense rather than an asset.
How to develop an effective IP strategy
The purpose of your IP strategy is to enhance your business goals and should be devised in collaboration by a specialist in innovative IP strategies. Before you appoint an IP specialist please consider the below distinct steps:
Observation – In order to identify the impact that your corporate IP strategy can have on the realisation of your business strategy, it is worth observing external trends. Consider your market and understand the impact of IP on that market. Look at technological advances that are relevant to your market and consider the needs of your particular consumer or those whom you wish to target. What are your competitors doing with their IP in order to meet those needs and targets?
Goals – Next assess your business goals and identify how your IP can enhance your business strategy. For example, if you are looking to increase market share, how can your IP help you to do this? Do you intend to branch out into different market sectors, or are you considering collaborations, brand ambassadors or maybe you are considering adapting your service delivery model, perhaps to take more advantage of the online and digital sectors? For further inspiration, take a look at our recent blog on digital transformation and the impact this is having on IP here.
Evaluation – In this stage you need to understand how IP can add value to the process of meeting your goals. Take the time to conduct an IP audit, which will go a long way to revealing where your IP may need some work in order to support your business strategy.
Protection – Following your IP audit, you can determine whether your IP protection is sufficient for the purposes of your IP and business strategies. It is likely that you will have identified areas requiring some work – take the time to find a good IP specialist who understands your business and goals. Read our guidance here on choosing an IP firm that is right for you. A chartered trade mark attorney can advise in detail on your IP strategy and the methods for obtaining the right kind of protection for your IP. Your IP advisor should always ensure that your IP protection adds more value than cost to your business, and supports your IP and business strategies.
Exploitation – Your IP strategy doesn’t stop when you have secured your IP protection. On the contrary, it is only once you have secured your IP that you can then move into realising the return on investment that you have made. An IP exploitation strategy enables you to enhance your business goals. For example, consider whether the licensing of your IP could add significantly to your income streams, and whether your IP can be exploited through collaborations and brand ambassadors. Now that you have your brand strategy in place your IP will consistently add value to your business, and will ultimately add to the bottom line when looking for investors or maybe purchasers.
Defence – There is only value in securing IP if part of your strategy is to defend those rights. Failure to prepare a defensive IP strategy will ultimately render your IP strategy ineffective in terms of adding value and return on investment. It is important to monitor your IP and ensure unauthorised use is not left untackled. Ensure that effective monitoring strategies are in place and communicated throughout the business.
Evolution – Your IP strategy, just like your business strategy, should not stand still. A solid foundation for your IP will ensure that your IP is equipped to adapt and evolve with your IP strategy and business goals. Continue to conduct regular IP audits, and continue to discuss your business goals with your IP advisor who will be able to point out where your strategy may need to adapt to meet your changing goals. Ensure that your IP strategy is communicated throughout the business, and make it part of your onboarding protocol for new staff in relevant teams. Ensuring that you have continued buy in from all aspects of the business will ensure that your IP strategy is as effective as possible.
4 major risks to your brand
Brand’s that don’t have an effective IP strategy in place are likely to be vulnerable to the following risks:
- Unnecessary expense: The lack of an effective IP strategy can mean that funds are being directed to the wrong place, either in the form of inappropriate IP protection, or expensive enforcement actions which do not support the business goals. This can result in IP being simply a cost rather than a valuable asset.
- Lack of consistency: Your IP strategy will ensure consistency across the business in terms of the handling of, and dealing in, your IP. Without an effective IP strategy, the business will suffer from lack of consistency, resulting in a scattergun approach to protection and enforcement.
- Loss of market position: Market leaders always have a handle on their IP strategy, and the protection and enforcement strategies are widely communicated throughout the business, consumers and competitors. A lack of IP strategy weakens your market position and allows a higher level of competition.
- Loss of business value: An effective IP strategy will add value to your business. An ineffective or non-existent IP strategy will mean that you will find it difficult to establish the return on investment, and your IP will not therefore strengthen the value of your business. Failure to identify and protect valuable IP assets will result in competitors taking advantage, or worse, taking the market lead ahead of you.
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From the everyday to the IP emergency, our accomplished Chartered Trade Mark Attorneys and IP Solicitors are driven to get the very best outcome for every brief for every client, every time! Sonder & Clay are a full service IP law firm with proven expertise and results in IP protection, strategy, disputes, and exploitation. Learn more about our IP services or get in touch with us for a complimentary IP audit today.