However, because IP is intangible (i.e., it cannot be physically seen or touched), many people overlook it as an asset, meaning it is not given the attention, protection or merit it warrants.
Why is IP valuable to your business?
If you have developed a new process, product or creation, you have the right to seek to protect it by law. There are four primary safeguards to protect IP: (1) trademarks; (2) copyright; (3) patents; and (4) trade secrets - each of these allow the creator to legally safeguard their innovation and prevent it from being copied, infringed or devalued.
If someone else or another business, were to use your creation as their own, it could minimise your organisation’s unique offering in the marketplace and possibly result in fewer sales. In circumstances such as these, it is likely that you would want to prevent that person or entity from using your IP. Whilst there are limited protections afforded by the law without registering your IP (known as unregistered IP), enforcing your rights by registering your IP is significantly easier; registration also makes it easier to utilise your IP to promote the commercial success of your business in the short and long term.
The exact worth of your IP will depend on a variety of factors, such as the length of protection it has been given; the financial benefit you derive from it; and its uniqueness. Understanding the value of your business’ IP is pivotal in evaluating your company’s financial position, market offering and strategic development.
What can you do with your IP?
IP can be dealt with much like a tangible asset, although many people are unaware of this. For example, if you are looking to raise capital through debt, the lender may ask for security in respect of the loan; IP can be offered as security for such a loan in the same way that physical assets, like plant and machinery, often are.
IP can also be monetised to create income for your business, such as through a licencing agreement in which the licensor grants the licensee the right to use IP that they otherwise would be prevented from using.
The rights to your IP can be assigned to third parties either as a standalone assignment or as part of a wider asset or share sale, in which the buyer will consider the value of your IP in determining the overall purchase price for the transaction.
While registered and well protected IP may improve the desirability of your business to potential buyers or lead to a higher market value, in the same vein, any unregistered or unprotected IP might be a potential red flag to a buyer during the sale of your company or its assets. If your goal is to exit your business or sell its assets at some point, it is a good idea to start preparing for this by looking at whether your business has any unregistered IP and, if so, the correct legal framework for protecting it.
How to protect your IP
While there are some automatic protections given by law to unregistered IP, it is important to understand that these are far more limited in comparison to the rights for registered IP. The primary shortcoming is that it is particularly difficult to enforce your rights to unregistered IP, as the creator will need to first prove that their right to the IP exists before they can take action against someone infringing on their rights.
Unregistered IP is also often less favourable in the length of protection afforded to the creator and the geographical remit of such protection.
The best way to protect your IP is by using the correct legal framework to register it before anyone has infringed your rights or used your creation.
Unfortunately, many people do not consider the importance and value of their IP or take steps to register it, until someone else is trying to use it for themselves. To reduce the risk of needing to enforce your rights through the court system, which can be lengthy and expensive, it is best practice to register your IP as soon as possible, and before you have marketed it to the public.
You should ensure that proper safeguards are in place as and when you start to deal with your IP in any way. It is important to have the correct documentation in place, so that your rights to your IP are not altered. For example, if you decide to licence your IP to a third party, it is crucial that you have an effective licence agreement protect your asset.
If you would like to discuss your business’s IP and your options for protecting it, please do get in touch on tel: 01892 515022 or email Iola on: iac@cooperburnett.com
This blog is not intended as legal advice that can be relied upon.
