During the industrial age, the wealth of a corporation was more or less identical to the wealth of its physical resources: factories, heavy equipment, inventories of raw materials and commercial property. Today’s economy, however, is a knowledge economy, and that is all reversed. Modern businesses have intangible assets, such as proprietary code, manufacturing formulas, brand marks, creative media, and patented engineering advances, that are their most valuable.
These are the things that man has created in his mind and they are legally termed as Intellectual Property (IP). IP is not just a legal tool to be used and is the blood that circulates through modern commerce. It shields corporate innovation from being copied, creates defensible competitive moats, and translates ideas into balance-sheet value. Most companies need to understand what IP is and why it is so critical to the success of their business.
The first of these core pillars is the demystification of intellectual property.The first of those four pillars is the demystification of IP.
IP is a broad-based, overarching legal concept that covers the various exclusive rights that protect different types of innovation, branding and creative expression. IP can be broadly classified into four main types:
Patents: Inventions and Technical Solutions Protection.
An invention may be protected by a patent which gives the inventor or business owner the exclusive legal right to prevent others from making, using, selling or importing a novel invention for a certain period of time (usually 20 years from filing date). The owner of the patent shares such technical information with the general public in return for the commercial monopoly that comes with the privilege. Patents are issued for functional innovations, which include novel pharmaceutical compounds, clean energy hardware, semiconductor designs and specialized manufacturing mechanisms.
The process of trademark application can be lengthy and intricate.Trademark applications may take a long time and be a complex process.
A trademark is a distinctive word, phrase, design, symbol or shape that identifies and distinguishes a company’s goods or services in the marketplace. Consider something like Apple’s silhouette logo, Nike’s swoosh, or iconic product names. Trademarks help to protect the goodwill, reputation and customer loyalty that a business has acquired over many years through its hard work and investment, by preventing others from using confusingly similar identifiers.
Copyrights: Protecting Original Creative Works
Copyright applies to original works of authorship which are recorded or captured into a tangible medium of expression. This includes source code for software, product manuals, video ads, architectural plans, blog posts, and graphic design. Copyright does not require registration, so the copyright is in effect as soon as the work is created and the owner has the exclusive right to reproduce, distribute, display, perform or adapt the material.
It is fair to say that the concept of “trade secrets” is an evolving one.The idea of “trade secrets” is a pretty new one, it’s hard to say how much.
Not every good intellectual property is appropriate for public exposure. Trade secrets are defined as business information that gives a business a competitive edge, and is kept confidential. The recipe for Coca-Cola syrup, closed source search algorithms, client acquisition algorithms and lists of suppliers are all well-known examples. The trade secrets are not subject to expiration, but they need to be protected by internal security and confidentiality agreements to ensure legal protection.
- How Intellectual Property contributes to business growth.
IP is not a cost center for start-ups, mid-sized companies or multi-national companies, but rather a central element in commercial power and value.
Creating Defensible Moats and Market Exclusivity
If your product is not formally protected, any competitor with bigger manufacturing capacity or marketing resources can replicate it, charge less and eat up your market share. Securing patents and trademarks erects legal barriers to entry. It ensures that no one can copy your research and development (R&D) efforts, protects your R&D investment, and gives your business pricing power because your products and services are legally unreplaceable.
The driving force behind business valuation and attracting investment is the company’s profit.Profit is what drives the business valuation and investment.
Currently, intangible assets represent as much as $90%$ of the value of enterprises of S&P 500 companies. When the due diligence process is conducted, lender, VC, and angel investors invest a significant amount of focus on an organization’s IP assets. A comprehensive, defensible IP portfolio demonstrates technical credibility and minimizes investment risk, and can generate much greater multiples in the funding round, merger or corporate acquisition process.
How to achieve Scalable Revenue through Licensing and Franchising
You don’t have to use IP exclusively in your business’s day-to-day activities. Licensing and franchising allow businesses to generate revenue from their IP by allowing third parties to manufacture patented products, use their proprietary software, or sell products with their trademarked brand name, and thus pay an upfront fee as well as a recurring royalty. This helps companies gain access to new geographic markets, and quickly scale revenues without significant capital investments.
- Steps to take to manage and protect business IP
Inaction with respect to a proactive IP approach can result in the loss of assets that can be stolen, diluted, or litigated at a significant financial cost.
Perform Regular IP Audits and Quickly file copyright and trademark claims.
Companies often produce valuable IPs without even knowing it! Regular internal IP audits can help identify new branding marks, proprietary workflows and newly created code. As many international jurisdictions are based on the principle of “first to file,” it is important to register the patent or trademark first to ensure that other businesses do not beat you to the punch with their own creativity.
Implementing the strict internal protections and contracts.Strict internal protections and contracts implementation.
Internal miscommunications are often at the heart of trade secret leaks and ownership disputes. Have all employees, independent contractors and agencies execute strong Non-Disclosure Agreements (NDAs) and complete Invention Assignment Agreements. Such contracts will guarantee that any intellectual work generated during company working hours is clearly company property.
The making of Creative Innovation a lasting equity.
In a global marketplace that’s as competitive as ever, one day technology can be copied online, but manufacturing can be done just like it and that’s the difference. It converts fleeting thoughts and innovations into valuable and protectable business value. A progressive company can establish a strong and sustainable basis for market leadership and safeguard its innovative heritage by systematically identifying, securing, and commercializing its IP.
