How to protect your IP, and know if you have something worth protecting…

In this article, Andrew explains how developing an effective IP strategy can add value to a business – whether that be through securing supply deals with third parties, helping to secure investment or driving up value of the business for due diligence and exit.

Tell us about your role?

The main part of my role is to guide clients through the practical steps of what is involved in an IP strategy and how to ensure that they get the best “bang for their buck” in terms of IP spend.

IP should be seen as an investment in the business, and I am keen to explain to clients how protecting their IP rights effectively now can add value later down the line. As part of this, I actively engage with the UK’s burgeoning start-up and scale-up community by regularly providing free support and advice to a number of start-up accelerators and incubators, discussing all aspects of IP including registered designs, agreements and licensing, as well as patents.

I also work closely with Jessie Harrison, a Technical Assistant at Mathys & Squire. We work together to advise clients on how to protect their IP and draft and prosecute patent applications through to grant.

Jessie takes clients through the steps of what is involved and works with them to ensure that their IP is effectively protected. She is also experienced at carrying out IP audits, helping clients review their current IP position and providing strategic recommendations as to what to do next.

What is IP?!

Intellectual property (IP) describes intangible property that results from creativity, including inventions, designs, and artistic work. Several types of intellectual property (IP) rights are available to protect your IP.

Registered IP rights are monopoly rights. This means they grant the right to exclude all others from acts such as producing, using, or selling your invention. However, this does not provide an automatic right for you to perform the innovation yourself. You still must take care to avoid infringing the rights of others, for example you may need to first obtain a licence of earlier third party rights in order to exploit your own. Non-registered IP rights generally prevent the IP, or articles embodying the IP, from being directly copied.

Registered IP rights are also territorial, which means they are only valid in the country or region in which they have been granted. Therefore, when applying for IP rights, it is important you apply to all territories your business may wish to operate in in future. The extent of protection for non-registered IP rights depends on the type of right.

How do you know if you have something that should be protected?

Consider where the value in your business lies. Generally, you should think about seeking IP protection if your business value is derived from intangible assets, such as brand recognition, or a new and inventive product or method. If the competitive advantage of your business could be easily diminished by imitation, it is likely that you have something that should be protected.

Patents can provide protection for a wide range of inventions, including physical products, methods, and systems. To be eligible for a patent your invention must be novel, inventive, and susceptible of industrial application.

An IP audit can be an effective way of reviewing your business’s IP position and providing you with recommendations about what to do next and how to do that (e.g. whether or not to protect the IP in a particular offering etc.).

What are some of the common mistakes you see people make when it comes to protecting a business’s IP?

A common mistake when it comes to protecting a business’s IP is disclosure.

It is understandable to want to share your innovative new idea or business offering with the world in order to gauge market interest or attract investors. However, if you later decide to seek a patent, any incidents of public disclosure can be used as novelty destroying against your own application. This may include the likes of websites, public presentations or pitches, and/or interviews. If some form of public disclosure is unavoidable, try to speak in vague and general terms and do not reveal exactly how your invention works.

Even private disclosures can throw up major issues if you don’t have sufficient NDAs and confidentiality agreements in place. If you are engaging with external agencies, consultants, or other third parties make sure you have signed written agreements which consider confidentiality and the ownership of IP in the event of collaboration.

Another common mistake is centred around ownership. Many businesses believe they own all of the IP in their product or offering, but when we dig a little deeper under the surface, this is not always the case. An IP audit may be useful in helping businesses like these review their IP position, particularly in advance of a major event such as an investment round or exit where due diligence will inevitably occur and could reveal some nasty skeletons in the closet. Taking action to mitigate those risks now can help prevent unnecessary cost (which inevitably happens at the 11th hour) and make third parties feel more confident in investing in your business.

Does IP help you raise investment? What impact can it have on business valuation?

Ownership of IP can greatly benefit a business’s ability to raise investment. The purpose of IP protection is to enable the inventor to reap the rewards of their ideas, thus a strong IP portfolio signals to investors a secure investment with a reduced threat from imitators. An IP portfolio may also present alternative revenue streams, such as licensing, which can increase the attractiveness of your business to investors.

Ownership of IP rights also boosts your business valuation as IP rights are considered an intangible asset. Unlike most assets, the value of intellectual property rights can increase indefinitely, for example the value of a trademark will increase in line with the success of the company. For many of the most successful companies, IP is often their largest asset.

How much does good IP coverage/protection cost? How much should businesses budget for this?

The cost of IP protection can vary greatly depending on the type of IP protection sought (e.g. patent, trade mark, design etc.) and the complexity of the IP.

Taking a patent application through to grant in the UK typically costs around £6,000 to £8,000, however this may be payable over a number of years based on the timescale which the application reaches grant.

One of the biggest costs is the drafting of the patent application. It is very important that this is done properly from the outset, as once the patent application is filed it is not possible to add material to it without the patent application being re-dated.

Costs will also increase where protection is sought in a number of different territories. For example, patent protection in the US or other territories abroad may increase costs by £4,000 to £10,000+. After grant, annual renewal fees of several hundred pounds are also payable in most countries. It may therefore be sensible to have investment lined up or in place to help pay for this.

Where can you make savings?

As mentioned above, costs will increase when IP protection is sought in numerous territories, therefore an easy way to reduce cost is by having a clear idea about where protection is commercially relevant. However, this doesn’t have to be decided from the offset as there is a 12-month period after filing a UK patent application to decide whether to take further action. Many then choose to apply for a PCT application which extends the option to apply for national patents in all major territories by a further 18 months. This may allow you to get a better idea of the commercial success and reach of your invention before committing to the cost.

If you are seeking patent protection for numerous related inventions, you can also discuss with a patent attorney the option of combining these within a single patent draft and then filing numerous divisional patent applications from the same patent draft to reduce drafting fees.

Similarly, providing your own black and white line drawings of your invention, where appropriate, can reduce costs associated with preparing a patent application.

OK, so we need to invest in IP but does it add to the bottom line? What impact does it have on revenue?

A recent study by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO) investigating the relationship between ownership of intellectual property rights (IPRs) and economic performance found that, although fewer than 9% of SMEs analysed held IPRs, those that did were found to generate a 68% higher revenue per employee than SMEs without an IP portfolio.

Intellectual property rights are not just for large corporations!

This finding uncovers the significant potential for start-ups and SMEs to tap into substantial revenue growth by investing in their IP portfolios.

What are your top 3 actionable takeaways for people looking to protect their intellectual property?

1. Ensure you have NDAs and confidentiality agreements in place to protect your intangible assets.

2. Ensure you have standard terms or agreements in place when engaging external agencies, consultants or other third parties which consider the ownership of IP in the case of collaboration.

3. Ensure you have a clear understanding of who owns and controls all the IP within your supply chain.

How can people get in touch with you?

If you have any questions or are looking to build your IP portfolio, please email me at AJWhite@mathys-squire.com to arrange a consultation, either virtually or in person.