Now that we covered the basics of Intellectual Property and why is it important, it’s time to elaborate on what happens once you decide to invest in your portfolio.
Regardless of company size, as an IP owner – let it be patent, trademark or design, the cost of registering and maintaining your IP will always be at the forefront of your mind. Depending on the number of IP rights you have, the first thing you will want to do is develop a comprehensive IP strategy.
For example, companies with fewer rights, might not feel the need to have a strategy in place as they have a clear purpose with their product and the markets & countries they would like to enter. In these cases, the protection of a particular product is the most important, as they might want to focus on having a smaller number of patents, and ensure that those are very well written. On the other hand, companies that are present in more markets, have more products to protect will want to ensure that they have a strategy in place that compliments the business objectives of the company.
For those, strategy will be decided depending on what they want their company to achieve. If the main goal is to attract investment or acquisition, for example, they might want to show off a bigger portfolio and by this demonstrating the possible value of their business. For example, for S&P companies, the IP market value has grown from 17% in 1975 to 81% in 2009. This means that when it comes to asset valuation in terms of M&A, the focus has shifted to a company’s intangible assets from its physical assets.
If investment is not a priority, not having any IP is also a strategy many companies take advantage of. As you can protect a particular product by way of secrecy. Elon Musk has refused to patent all of SpaceX’ technologies, as he believes that publishing patent information would allow foreign companies to copy his innovations. The same reasoning lies behind Coca Cola’s decision to make their recipe a trade secret, as had it been patented, it would have expired after 20 years of protection and the recipe for its drinks would be available to anyone to copy.
Most businesses will want to take advantage of the protection offered by having IP rights as it comes with other advantages as it also allows them to keep their competitors out of a specific market. For example, Protector & Gamble’s packaging designs are patented so that they can licence their competitors. This allows them to enter a new market, as well as earn money on the royalties received from the licence fee.
When it comes to the cost of maintaining a portfolio, there are many factors to take into account. Whilst trade secrets and trademarks hardly cost anything to maintain, patents can be very expensive – from the point of registering (paying the government fees & the attorney fees), to renewals. As patents have a lengthy registration process and require a yearly renewal fee it can be the most expensive form of rights. As a result, ROI in this case will also take some time, meaning that in the first 3-5 years, money spent on this part of the business will likely not crystallize. However, with a strategic plan in place, it can be estimated when, how much your return will be and how to develop your portfolio to get the best outcome.
Head of Ventures
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Categorised in: IP