Most modern businesses are likely to own some intellectual property. For innovative businesses who rely on research and development, understanding the value of your IP and – how to protect it – can be critical.
The World Intellectual Property Organization describes intellectual property (IP) as “creations of the mind” – covering business outputs such as artistic works, product names, and symbols. But it also encompasses more complex intangible assets such as inventions, developed products and software.
IP is a valuable asset that could be vital to the protecting your market, growing your business and securing external investment. Yet, according to Capify’s Business Confidence Survey nearly a quarter (23%) of SMEs have never valued the IP their business own and operate, whilst just under one-in-five SMEs (18%) have taken to steps to protect the IP they hold.
In today’s economy, most businesses will depend on technology, creativity, design or brand recognition to operate successfully and these can have an enormous economic value. Indeed, data from the Office for National Statistics found investment in intangible IP assets was £134.5bn in 2020, only slightly behind investment in tangible assets at £137bn.
Financing innovation
The economic benefit of SME innovation and development of intellectual property has become a Government focus in recent times. With the availability of finance to support and protect ambitious businesses being a key priority. Speaking in March 2024, at the launch of co-authored report by WIPO and the UK Intellectual Property Office (IPO), on financing SME IP, Minister for AI and Intellectual Property, Viscount Camrose, said: “This report is further evidence of the UK’s commitment to supporting business to grow and scale however we can, tapping into their unrivalled IP innovations to help them scale and grow. Accessing the right finance at the right time is critical for firms looking to expand…”.
Investment in IP can be time intensive and expensive if not managed properly. SMEs should develop a strategy to systematically identify, protect, monitor and monetise its IP assets. They should think about:
- Identifying: Firstly, it’s essential to understand what constitutes IP. This includes trademarks, patents, copyrights, and trade secrets. For some sectors, IP may not be so immediately obvious. However, even a company’s name or logo, can be protected through trade mark registration. Trade marks help to distinguish a company, its products and services, and help promote brand reputation. SME owners should identify all IP assets their business owns or creates, as these can be valuable assets that contribute to the overall value of the company.
- Valuing: There are various methods for valuing IP, including cost-based, market-based, income-based, and royalty-based approaches. Depending on the nature of the IP and the industry, different valuation methods may be appropriate. SMEs should seek professional advice from IP valuation experts to accurately assess the value of their IP assets.
- Protecting : Protecting IP is crucial for safeguarding its value and preventing unauthorised use or infringement by your competitors. SME owners should consider obtaining patents, trademarks, or copyrights where applicable to protect their innovations, branding, and creative works. Additionally, implementing robust confidentiality and non-disclosure agreements (NDAs) can help protect trade secrets and proprietary information.
- Enforcing: In the event of IP infringement, SME owners should be prepared to take legal action to enforce their rights. This may involve sending cease-and-desist letters, pursuing litigation, or seeking alternative dispute resolution methods such as mediation or arbitration. Having a clear and proactive strategy for enforcing IP rights can help deter infringement and protect the value of IP assets.
- Auditing and reviewing: SME owners should conduct regular audits of their IP portfolio to assess its value, identify any new IP assets, and ensure that existing IP protections remain up to date and compliant with any regulatory changes. Regular reviews can help SMEs adapt to changes in the business landscape and make informed decisions about IP management and strategy.
- Expanding: If you expand your business abroad, you can use protected IP assets to promote your products or services in other countries. Overseas patents for your IP assets open up opportunities to launch in new markets. When operating internationally, it’s essential to understand IP laws and regulations in different jurisdictions. Obtaining international IP protections such as patents or trademarks can help prevent infringement in foreign markets and facilitate expansion opportunities.
Often seen as the preserve of larger business, smaller businesses also need to get wise to the value of the IP and the risks attached to not adequately protecting it. SMEs should apply the same rigour to their intangible assets as they do to their tangible assets. Having a robust process for curating and managing their IP will stand them in good stead for future growth and investment.
By understanding the importance of valuing and protecting their intellectual property, SME owners can maximize the value of their IP assets and maintain competitive advantage. Seeking the professional advice necessary to value and then protect IP may require investment, but the long-term benefits of having a robust IP strategy are clear.
At Capify, we’ve been helping businesses innovate and grow for over 15 years. You can see if you’re eligible for one of our loans with our online eligibility checker. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process. Give us a call today on 0800 151 0980.
