Making the Case for Intangible Asset Protection in the Enterprise
A record high number of 333,530 U.S. patents were granted in 2019; if one of them wasn’t yours, that means there are 333,530 chances another company has secured the intellectual property (IP) rights to a product or service that might be similar or even identical to one you want to develop.
It’s a sobering thought, but it’s an unusual time. As businesses pivot to adapt to a new normal that emphasizes working remotely and delivering contactless customer experiences, organizational priorities are shifting, and many companies are implementing budget cuts. In this climate, it may be tempting to scale back on an expenditure like intangible asset protection, and reallocate funds exclusively to personnel or restructuring efforts.
While this may appear to be a wise course of action, there are compelling reasons for mid-market and enterprise technology companies to not only maintain intangible asset protection, but to prioritize it now. Here are just a few of them:
Even in more stable times, your intellectual capital is one of your greatest assets and chief differentiators. Developing strategies and action plans to proactively identify, register, and vigorously protect the legal rights to your intellectual property via patents, copyrights, trademarks and trade secrets is key to preventing others from taking what you have developed and marketing it as their own.
IP asset protection guards against piracy or counterfeiting of ideas, and copycats who can flood the market with products mimicking the ones you are developing or currently selling. This becomes even more important in a time that necessitates quick and agile adaptation.
Tech companies have an opportunity to develop innovations to meet the evolving demands of a world coping with pandemic, from advancements in the medical equipment being used by frontline healthcare workers to improvements in software being leveraged by educational institutions grappling with the transition to all virtual classrooms.
These new ideas need to be protected, not just to ensure that the ideas’ originators maintain creative control and market dominance, but also to reward innovation in a time when it is needed more urgently than ever.
Creating additional sources of revenue
When you protect your IP through a patent you retain the rights to that intellectual property for the life of the patent. Those rights include licensing the patent to another party, which means that you can monetize your patent without actually having to manufacture the product yourself. When you license a patent, you enter into an agreement with another party wherein you retain the title to or ownership of the IP, but the other party is able to use it to produce and sell the product.
There are a range of licensing types, and which you choose will determine, for example, whether you retain full ownership of the patent or just the title, whether you get an agreed upon sum for the license or a pre-determined running royalty, whether the license is exclusive to one party or not. There are also restrictions that can be set in place to, for example, require the party to whom you are licensing your patent to only market within a specified geographic area.
Licensing of patents can be a lucrative source of income in boom times, and an even more welcome one in times when cash flow is not as robust.
Investing now to avoid spending more later
IP protection can be compared to insurance in that it is an investment you make to protect against damage and loss. In this case, the damage or loss is the possibility that another company will take your idea and market it as their own, reaping the benefits of your innovation. Just as a homeowner without insurance would be left footing the bill for repairs in the event of fire or theft, business owners who do not invest in IP protection may find themselves facing costly “repairs” if another firm reaps all the profits from their innovation.
The damage may also include the loss of monies already spent on the idea and the allocation of additional research and development funds to innovate a new product. If the competitor has achieved market dominance with your product’s name or something close to it, rebranding may even be necessary.
There is one other layer to consider here, and that is that it’s crucial to patent your innovation in the countries in which you plan to sell your product, where the market opportunity and profit potential in that country justifies the expense of doing so. Patents only provide protection within the country that grants them, so if you only apply for a U.S. patent but know you will be marketing in Germany, you may find yourself facing a competitor overseas that severely limits your prospects in the region.
Boosting your company’s net worth
Harkening back to the insurance analogy, most people purchase homeowner’s insurance because the home tends to be an individual’s greatest asset. Within a business, your intangible assets are your greatest asset.
These assets require the right kind of protection to ensure they remain yours to benefit from and leverage in the way that will most benefit your organizational goals — whether it be to produce a product yourself or license a patent to another company for production.
It is estimated that on average up to 70% of company assets are intangible — IP that is not a physical structure or product but that figures largely into a firm’s valuation. This has clear implications for financing and strategic planning, as well as mergers and acquisitions. Being able to navigate these processes knowing that your most valuable asset has the protection of a legally enforceable patent, copyright, trademark or trade secret is critical to ensuring a viable and profitable path forward.
If you lead a company that innovates, you know the challenges that business owners are facing today—but you also know that innovation is a key to meeting them. Now is the time to prioritize your IP protection so that your innovative solutions provide society with the technology we need to move forward, and provide your business with the ROI you need to continue to grow your market leadership.
Image Credit: 1Day Review (Flickr @ Creative Commons)
This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. The opinions expressed in this article are those of the author only and are not necessarily shared by Dilworth IP, its other attorneys, agents, or staff, or its clients.