The first half of 2020 has been anything but predictable. Whether on Main Street or Yonge Street, Wall Street or Bay Street the economic and business problem remains the same: uncertainty is the only constant. For start-up and scale-up companies this uncertainty is particularly acute. Investor confidence is diminished at a time when consumer purchasing power is in flux. Owners, founders, and C-Suite executives may be wondering what to do.
While meeting payroll and maintaining operations are primary concerns, so too is keeping an eye open to the possibilities ahead. A colleague once reminded me that while short-term plans may be uncertain, if the 5-year plan and goals remain the same, it’s important to ensure that a strong foundation is being laid to build on once stability returns.
Intellectual property (“IP”) strategizing and planning is one way that start-up and scale-up companies can strengthen their current position while also investing in crucial assets, helping solidify their position while simultaneously contributing to medium- and long-term financial viability. As IP increasingly becomes one of the most important aspects of business success, forward-looking firms can combat uncertainty and invest in their future by following three steps to recognize, protect, and commercialize their valuable IP assets.
- Recognizing Opportunities and Mitigating Risks
Successful and leading companies know that sophisticated and forward-looking business plans must approach IP as being crucial to both their current and long-term success. IP strategy, protection, and commercialization are not simply things to be put in the ‘legal’ ledger but should be approached as key components of the overall business strategy—especially for new ventures.
Patents, which apply to useful inventions or improvements, and trademarks, which apply to words, images, slogans or other distinguishing ‘marks’ that distinguish goods and services in the marketplace, are often the most prominent forms of IP protection. However, everything from internal and confidential information, marketing and advertising copy, customer lists, unique aesthetic product designs, and more are potentially protectable via IP— through trade secret or confidential information, copyright, and industrial design (or design patent) law respectively. Businesses should assess their operations to identify core technologies and assets and protect them accordingly.
- Protecting Valuable Assets and Avoiding Costly Infringement Allegations
While there is a considerable advantage to being the first mover with technology or commercial innovation, there is also an attendant danger of moving too fast and breaking your own competitive position. Protecting valuable IP can be done through government registration or not as well as through various contractual means and determining an appropriate strategy should balance immediate budget realities as well as return on investment (“ROI”). As IP law is based at the national level, actual, potential, and longer-term target markets must be considered. Fundamentally, core aspects of the business should be protected as much as possible whether through registration as well as internal procedures and contracts—especially as they relate to the work created by employees and contractors.
Assessing one’s own core activities in relation to the registered and unregistered IP of others must also be addressed. Freedom to operate is paramount when developing a new product or brand. Professional searches are worth investing in to receive professional advice about registrability, potential infringement, and how to bring your ideas to market in a cost-effective and strategic fashion.
- Commercializing IP and Maximizing Returns on Investment
Prior to formal registration of IP, the benefits of the time and money invested can begin to be realized. While the rights to exclusivity are not conferred until registration, marketing and branding can be updated to account for the pending status of your application. For example, after a patent application has been filed, marketing the product as “patent pending” will signal to consumers (or potential collaborators or financiers) that the invention is being carefully managed while also discouraging competitors from moving forward with similar goods. And with trademarks, even before the filing of an application marking a name, slogan or other potential trademark with TM signals to others that you are strategically managing the asset, helping discourage them from passing off on your brand recognition and consumer goodwill. Following registration, the rights secured through formal routes can then be commercialized and spur your ROI.
The market exclusivity garnered through patents builds value and enables higher prices for the product as well as greater market penetration as competitors cannot offer their own similar products based on your invention. When combined with trademarks and branding to further differentiate the product in the market, this offers increased enterprise value through control of the market for your goods and services.
Another route for generating ROI is through the sale of IP that is not core to the company’s operations. Valuing IP is a complex process based on the investments made in research and development (“R&D”) and acquiring the exclusive rights as well as their strategic and business importance in the marketplace. If and when once strategic assets begin to depreciate strategically or financially, they can be sold to others who may value the rights more. Similarly, the purchase of existing IP can be useful for further solidifying your position without undertaking in-house R&D. The goal here is to sell what you do not need and purchase what you do.
Licensing aspects of the rights to others can also achieve financial returns while maintains ownership of the rights in question. Whether through exclusive or non-exclusive terms, the strategic licensing of IP to those better positioned to take advantage of the rights can return stable and reliable revenue to you that can be redeployed elsewhere. Cross-licensing also enable rights holders to increase their freedom to operate by allowing for the use of others’ valuable IP without the fear of infringement. Licensing copyright, particularly in the software space, is a prime example of using contracts like these to derive revenue from IP without ceding control and ownership of the invention itself.
Litigation can be costly but necessary to ensure that your IP rights are not infringed upon and that your financial returns are not misappropriated. Using litigation to enforce your rights remains an ever-present option that can result in strict penalties for the infringing party and substantial financial returns and competitive positioning for the rights-holder. Developing a strong IP portfolio helps position your company in a positive position for enforcing your rights while discouraging other rights holders from make unsubstantiated claims against you. IP litigation is a growing area in recent years, which reflects the value and necessity of developing robust IP strategies throughout the business development cycle.
Investing in a comprehensive IP strategy and robust IP portfolio can help increase a company’s current value while positioning them for future growth once uncertainty recedes. Recognizing, protecting, and commercializing intangible assets that may be under-utilized currently is a way of putting value on the books. Investments should be made according to business needs and growth plans and there is a growing community of like-minded legal experts and IP professionals ready to assist with maximizing IP opportunities alongside the growth of the business itself. While uncertainty may currently reign, allocating time and resources to capitalizing upon existing IP is a means of helping develop new revenue sources and pathways to growth.