The following comprises part two of a
chapter written by Gerard Chandrahasen for the latest edition of the
Innovation Handbook published by the Intellectual Property Office and
the Technology Strategy Board
Maximising value from your Intellectual Property
To create successful companies, entrepreneurs and CEOs must have a fundamental understanding of the narrative of the company: its purpose, its value, and its goals.
To be valuable intellectual property must be aligned with this narrative. For example, if the story of your business is the development of innovative technology relating to payments where the US is a major market and VISA or Mastercard are key competitors, then the business may want to apply for several patents protecting core aspects of that technology in the US. The IP strategy can then be explained to investors, customers, and acquisition targets as:
We have developed new payment technology which will revolutionise the payments sector. Opportunities for acquisition or licensing reside within major credit card companies. We have applied for several patents in the US covering our core technology. These potential monopoly rights prevent duplication of our technology and aim to create a licensing bidding war amongst potential acquirers.
To effectively align IP with the narrative of the company, an understanding of the purposes of IP is necessary. There are several uses to which IP can be put during the life of a company:
1) Attract investment
Early-stage investors look for companies that are attractive to later investment, and late stage investment, particularly series B or C rounds, are often predicated on your company holding a strong IP portfolio.
Therefore, constructing an IP portfolio can encourage investment from these early-stage investors.
2) Competitor Deterrence
While your brand reputation is becoming established in the market, the creation and use of a similar brand by a competitor could divert potential customers. A registered trade mark for your brand establishes your priority rights to that brand.
The deployment of unique technology will often attract imitators looking to capitalise on the impact of your innovation in the market. A pending or granted patent may help to indicate to competitors that the concepts underlying your technology are not just novel and inventive, but proprietary.
3) Defensive – first to invent
Many other companies utilise the patent system to secure monopoly rights in innovations. This can place you at a disadvantage even if you were the original creator of the innovation. A patent once granted is presumed to be valid and it can be difficult, expensive, and time-consuming to revoke a patent. Accordingly, it may be prudent to apply for patents for those innovations you consider to be core to your business.
Particular attention should be given to this issue if you sell into the US. Companies within the US seek patents at a greater frequency than the UK, and your company being based outside the US is no defence to patent infringement.
Additionally, some companies known as non-practicing entities or “patent trolls” are in the business of threatening companies of patent infringement. Your earlier patents covering the same innovation can be used to undermine this threat.
4) Defensive – cross-licence
In a crowded field, you may be accused of infringing the IP rights of another company. In this situation, it can be useful to have secured your own patent portfolio, because it may be that the accusing company is infringing your patent rights.
A threat of counter-suit can encourage the other side to negotiate a cross-licensing arrangement, which gives you the right to use their IP in exchange for their right to use your IP.
5) Tax breaks
In the UK, from 1 April 2013, corporations which pay tax within the UK can place worldwide profits from products incorporating a UK or European granted patent into a Patent Box. The corporate tax rate for these profits are effectively halved.
6) Improve Exit
IP is an asset much like any other part of your business. Building IP assets during the life of the company is, therefore, a prudent action that will increase the value of the company for trade sale or IPO.
Return soon for the next part of this chapter which will dispel the 7 Patent Myths.