IP Resources

Recognising Intellectual Property in Your Business

What is IP?

Unlike the products they protect, IP assets cannot be seen or touched. So, it can be difficult for businesses to appreciate their true value. Like other forms of property, you can buy, sell and license IP. IP Rights can enable their owner to take action under civil law to try and stop others from replicating, using, importing or selling their creation.

The different types of intellectual property rights are:

Patents protect new inventions and cover how products work, what they do, how they do it, what they are made of and how they are made.

Trade marks protect brands. This could be for a business name, a product or a service. The trade mark could be made up of words, logos or a combination of both and can even be sound or action based.

Design protects the overall visual appearance of a product.

Copyright protects literature, artistic works, photographs, music, dramatic works, software, databases, films, radio and television broadcasts, sound recordings and published editions.

Trade secrets might also be an important part of your business. The law of confidentiality protects trade secrets. To keep trade secrets protected, you must establish that the information is confidential, and ensure that anyone you tell about it signs a non-disclosure agreement (NDA). If they then tell anyone about it, this is a breach of confidence and you can take legal action against them.

Lecture Videos

IP in business planning

Your business builds goodwill and recognition through your brand, product or service. This value builds up over time and becomes integral linked to your business’s IP assets. If used well, IP can offer a solid platform for any business to grow. How you plan, manage and protect your ideas should be a crucial feature in your business planning. What seems unimportant today could be worth millions of pounds in the future, if protected.

Getting help

One of the first things you should do is understand if you should protect your IP. You could invest time and money in your business, only to later find the IP already belongs to someone else.

The free, fast and easy-to-use online IP Health Check is used by thousands of businesses to both identify their IP assets and provide advice on how to protect them.

Presentation Slide Deck

TMQ Webinar PowerPoint

Recognising Intellectual Property in Your Business

Like other forms of property, you can buy, sell and license IP, it is important you understand the value your trade mark, patent or design.

Your IP could be as valuable as your plant, premises or stock. It could even be your single most valuable asset which you could use to secure finance for company growth. You may also need to know the value of your IP assets when:

• seeking funding
• for joint ventures
• mergers and acquisitions
• or during bankruptcy

Not all IP is valuable. Unless your IP assets help to create, maintain or increase cash flow they may have no financial value.

https://youtu.be/8hhRvhFpaaI

The cost method

Valuing IP is not an easy task. How much is your brand name worth after years of marketing? Does your patent protect your product or is it redundant?

Intellectual property rights change in value for a variety of reasons. A patent may begin its life as a unique solution to a problem, but in time other solutions to the problem may be found which reduce its worth. Alternatively, successfully marketing your product can ensure your patent is very valuable. Trade marks generally gain value as they become better known.

There are a number of ways to value IP rights (IPR). They all have their limitations and no method is appropriate in every case. The stage of development of the IPR, the availability of information and the aim of the valuation all have a bearing on the method used.

Here are 3 useful examples:

The cost method

This valuation is based on the costs you incurred developing or creating an IPR. It also values what it might cost to recreate or develop a similar product or service. It doesn’t take into consideration the current market value of your product.

Costs usually included are:

• labour
• materials and equipment
• research and development
• creating a prototype
• testing and trials
• regulatory approval and certification
• registering the IP
• overheads for utilities, accommodation and support staff

This method assumes that your potential buyer can avoid these costs by buying the IPR .

Valuable benefits may be:

• time: by purchasing the right from the you, the buyer will not waste time researching and developing their form of IP
• expenditure: if attempting to recreate their own IP, the buyer would spend at least this much
• success: a buyer may not be successful in developing the IP
• protection: a buyer may not be able to protect their IP, and may well be infringing on others

This method of valuing intellectual property assets lends itself to an overall assessment when buying a business. It also considers assets when they are at an early stage in their development. However, the emphasis on costs, rather than profit, can skew the figures so that market potential is not fully recognised. This method does not take account of future value. It therefore misses out on a standard by which value is traditionally calculated. 

The market value method

Understanding the value of your product based on its recent track record in the market place. This may be a more reliable way of establishing what people might pay for your IPR. Assessing the sale or licensing of similar products in the market may provide a useful benchmark.

The problem with this method is that it can be very hard to find published data on IP transactions as they are often confidential. IP transactions are hard to generalise. There are sources of data for various sectors, but they tend to provide a wide range of figures for sales and licences which are only broadly comparable.

Few transactions allow a valid comparison and arrangements may differ in terms of:

• exclusivity
• payment structure
• any technical/other support provided
• territory, economic climate and market conditions.

No two deals are the same.

This method is unlikely to be used to value patents. That is because the value of a patent depends on its novelty. That novelty means there is unlikely to be comparable information. However, this method is objective and it can provide a realistic analysis of value based on your right’s worth as perceived by both owners and their consumers. This method can be useful for researching the high, low and average royalty rates paid in any given market sector. In negotiating a licence agreement for example, an agreed industry range may form the basis of a discussion.

The income or economic benefit method

This method focuses on the revenue IP rights may generate for your business in the future. It considers both the future income, which a right may generate during its economic life, and the costs of generating that income. Risk and financial costs are factored into the equation. The end result is described as the ‘Net Present Value’ or NPV.

This method allows a buyer to consider investment based on whether the NPV is positive or negative.

Although the NPV is a useful, easy-to-use tool. It should be remembered that the income or economic benefit method of valuation is based on an assessment of likely future events rather than past performance.

Difficulties with this method include:

• it is difficult to estimate the economic life of the IPR
• it is difficult to estimate the income over several years

Other factors that need to be taken into account include:

• the strength of the IPR
• the size of the potential market
• the nature of the competition
• changes in the economic climate
• the cost of registering, enforcing and defending the IPR need to be taken into account.

The way in which the IPR is exploited, the costs involved, the time it will take to get to market and the risks involved along the way will vary from business to business. Other things to consider are income which may be generated from other factors e.g. the skill of the business’ staff.

Uncertainties about the future mean that it is unrealistic to project income for more than 4 or 5 years. Trying to estimate the income for early stage technology is very difficult.

A sub method of the income or economic benefit method is the relief from royalties method. This method assesses IP royalties. It is based on an assessment of what royalty costs a company is avoiding by virtue of owning the IP right.

Additional Resources

Intellectual Property Right Valuation Checklist

Skeleton Licence IPR

Licensing intellectual property

A licence is an agreement between you as the IP right owner and another party. It grants them permission to do something that would be an infringement of the rights without the licence.

IP can be “licensed-out” or “licensed-in”. You can “license-out” to another company in return for a fee. You can “license-in” if you want to use another company’s IP to develop your own business and products. The person granting the licence is usually called the licensor, and the person receiving the licence is usually called the licensee. There may be more than one licensor or more than one licensee in a licence agreement.

https://youtu.be/QOY0VoarQ4Y

Benefits of licensing

Sharing costs and risk – where a company licenses the right to manufacture and sell products, the licensor receives revenues from that licensing but does not take the risk of manufacturing, promoting and selling those products. On the other hand, the licensee has the right to use the IP without the expense and risk of the research and the costs of developing the product.

Revenue generation – licensing can broaden the reach of IP into different markets.

Increasing market penetration – an owner of IP may license another business to sell in territories that the owner cannot cover.

Reducing costs – a business may ‘buy-in’ innovation to reduce its research and development costs.

Saving time – a business may get its products or services to market more quickly by acquiring a licence to use existing IP, instead of re-inventing the wheel (sometimes referred to as an “engineering workaround”).

Accessing expertise – by taking a licence, a business may tap into expertise that it does not have in-house.

Obtaining competitive advantage – by acquiring a licence to use IP, a business may obtain an advantage over its competitors.

Collaboration – businesses may want to work together to develop new products and services. Whenever you think about taking or granting a licence of any IP, the first step should be to assess the needs and objectives of your business and how licensing might help meet them.

When granting or taking a licence isn’t appropriate

For instance:

• if you have the ability to commercialise your own IP, you might be better off doing it yourself
• you should be wary of licensing your IP to companies who might lessen the value of the IP. For example, if you are licensing a trade mark you will want to consider whether the quality of your brand will be affected by the goods it is applied to
• the prospective licensor may want to charge royalties that are too high and may restrict the growth of the business
• the IP to be licensed may be too weak – if a competitor could work round it and take away market share, it may not be worth investing in a licence

Patents and ‘licences of right’

The IPO has a database of patents that are endorsed ‘licence of right’. This means that the patent holder has agreed to licence their patent to anyone who asks. You can search the database for patents endorsed licence of right to use the technology for your innovation or business.

If you have a patent, you can ask the IPO to endorse your patent with a licence of right in the register of patents. This means that you must grant a licence to anyone who wants one.

The licence will still be an ordinary, commercial licence and the terms and fees will be a private matter between you and the licensee or licensor. The IPO won’t investigate the validity of a licence unless you can’t agree the terms under a licence of right.

The main advantages of having your patent endorsed with a licence of right is that it lets other people know you are happy to licence your intellectual property. The IPO reduces its annual renewal fees to half the usual cost if your patent is endorsed licence of right.

To apply for a licence of right endorsement, fill in Patents Form 28. Your application should reach the IPO at least 10 working days before your next renewal fee is due. If you would like to licence any of the IP on the database, you will have to approach the licensor directly. You can find the patent owner’s contact details in the database.

You can cancel a licence of right endorsement at any time by filling in Patents Form 30. You will have to pay the standard renewal fees, which will be backdated to your renewal date.

The IPO will advertise your cancellation request in the Patents Journal for 4 weeks to allow anyone to oppose your cancellation request. Your licence of right entry will be cancelled:

• if there are no existing licences
• you have paid the balance of renewal fees
• any opposition to the cancellation has been dealt with

You don’t have to tell the IPO if you grant a licence, but it’s better if you do. You should do this within 6 months. The licensee may lose some rights if you don’t. The licensor usually tells the IPO by completing and signing Patents Form 21 stating the type of licence. If the licensee tells the IPO, they will require additional information:

• the date of the agreement
• the names and addresses of the parties involved
• the patent number

Additional Resources

Licencing Checklist

Skeleton Licence IPR

Registering Trademarks

• may put people off using your trade mark without your permission
• make it much easier for you to take legal action against anyone who uses your trade mark without your permission
• allows Trading Standards Officers or Police to bring criminal charges against counterfeiters if they use your trademark
• means you can sell it, franchise it or let other people have a licence that allows them to use it.
• trade marks are registered for a fee by the Intellectual Property Office in the UK and other bodies worldwide.

They must be renewed every ten years, but can be renewed indefinitely. Registered trade marks can be identified by the ® symbol.

The most effective trade marks are those ‘distinctive’ to the goods and services they protect. This allows consumers to identify your goods or service from your competitors.

Not everything can be registered as a trade mark. Trade marks which can be difficult to register include those which:

• describe the products you sell or the services you offer, for example ‘mature cheese’;
• are not clearly of commercial origin for customers, for example, the phrase ‘Putting Customers First’
• have become customary in your line of trade, for example ‘Four by Four’ or ‘4 x 4’ for vehicles
• include a specially protected emblem, for example, the ‘Red Cross’ or the ‘Olympic Rings’
• are offensive to the public, for example, trade marks which contain taboo words or pornographic images;
• deceive the consumer
• are three dimensional shapes which are typical of the goods you are interested in, for example, the shape of a simple plastic bottle for your drink product

If your trade mark does not fall into any of these categories, there is a good chance that it will be considered acceptable for registration.

If, after being published, your trade mark does not then attract any objections from other trade mark holders, it will be registered.

You should receive a formal report explaining the outcome of the examination within 10 days of applying. If your application is acceptable, it can be registered in as little as 3 months from the date of filing. It can obviously take longer if you have objections which you need to overcome.

Getting help

For advice on building your brand, registering overseas or more complex aspects of the trade mark process, contact the Chartered Institute of Trade Mark Attorneys.

For more information on trade marks, including how to search for existing registered trade marks and how to register internationally.

Unregistered trade marks

If a business doesn’t register its trade mark, it may still be able to take some action if someone uses the mark without permission. It would need to use the common law action of ‘passing off’. However, passing off can be very difficult and expensive to prove.

Broadly, to be successful in a passing off action the trade mark owner must prove that:

1. There is protectable goodwill in the mark;
2. There is a misrepresentation of the mark, and
3. That misrepresentation caused damage.

Without misrepresentation there is no passing off. This is a complicated area of law and in any such situations it would be wise to seek advice from an IP Attorney.

Patents

A patent protects your invention and lets you take legal action against anyone who makes, uses, sells or imports your invention without your permission.

A patent doesn’t keep your invention secret. In return for the legal protection you get, you share how to create or replicate your invention with the public. When your patent expires, other people can then make and sell your invention.

You can only apply for a patent if you have created something that is inventive, new and useful. A patent can protect innovations like machines, industrial processes, pharmaceuticals and their production methods, computer hardware, electrical appliances and biological products and processes.

You can’t patent, for example, literary, dramatic, musical or artistic works, anything that’s an idea, a way of thinking, a scientific or mathematical discovery.

You have to pay the Intellectual Property Office to apply for a UK patent and the process can take several years before you receive a granted patent.

Many applications never result in a granted patent because they don’t satisfy the legal requirements. Patents can give protection for 20 years provided renewal fees are paid each year.

Getting a patent does not guarantee business success. You should carefully consider how you are going to use the patent and what you will gain from it.

It’s generally your responsibility to enforce your patent and ensure it is properly protected, meaning that any legal action against another party will be started, and funded, by you.

So, you need to make sure that the potential benefit of a patent will outweigh the time, effort and money it takes to get and maintain one.

Advice

You should seek legal advice before applying for a patent as it can be a complex and costly process. A patent specification is a legal document and requires specialist skills to draft properly. Only 1 in 20 applicants get a patent without professional help. Your chances of obtaining a useful patent are much greater if you use an IP professional.

Patent attorneys are legally qualified and independently regulated. Some will give you initial advice free of charge. To make the most of this free advice it is recommended that you think about the questions you want to ask beforehand. This will allow you to gain as much information from the consultation as possible.

PatLib Centres cover all areas of the UK. They hold clinics with IP professionals and offer help on a variety of services including patent searching.

Fact

The most common mistake made by inventors is to reveal their invention before applying for a patent. If you have made your invention public, you could lose the possibility of being granted a patent.

Non Disclosure Agreements

1. Before you share information

The best way to keep something confidential is not to disclose it in the first place. If you do need to share information you should use a non-disclosure agreement (NDA). This could happen when you speak to potential partners like:

• investors
• manufacturers
• stockists

You may have to tell people about your idea or your business to get advice. This could be from:

• accountants
• banks
• financial advisors
• insurance brokers
• business coaches
• or a marketing agency

It is important that you don’t assume conversations with advisors are automatically confidential.

An NDA is a legal contract. It sets out how you share information or ideas in confidence. Sometimes people call NDAs confidentiality agreements.

Your IP attorney or solicitor can advise on confidentiality and draw up an appropriate NDA for you to use.

2. What to consider

You should decide what your NDA covers. It could protect only information which is recorded in some form and marked ‘confidential’. It can also protect information you share in meetings or presentations.

A good NDA restricts the use of the ideas and information to a specific permitted purpose. This could be the evaluation of your idea or the discussion of a joint venture. Specify that purpose in the NDA as precisely as you can. You can always widen the permitted purpose later. You won’t be able to narrow the restriction on the use of your ideas or information later.

You should be realistic. The person you are talking to might need to share your information with others. This could be their employees or professional advisors. They may also need to copy your information for this purpose. Make sure that these disclosures to employees and professional advisers are made in confidence.

Think about how long the confidentiality should last. It’s common to see it limited to 3 or 5 years. After that time they will be able to use and disclose your information. Once information is made public in anyway, an NDA can’t be enforced.

Some information could be kept confidential forever. Examples of these are:

• non-patentable know-how
• lists of customers
• personal information about the individuals involved in a project

Some companies or organisations could ask you to sign a document agreeing that they will not have a duty to keep your ideas or information confidential. If that is the case, you need to decide whether to risk disclosing your ideas to them.

3. Types of NDAs

NDAs can be one way or mutual. Use a one-way NDA if only you are disclosing information and a mutual NDA if both parties are.

If the NDA is one-way only, it may need to be executed as a deed to make it enforceable. This is easy to do, so don’t make what should be a one-way agreement into an artificial mutual agreement.

If you and the other party to the NDA are not both in the same country, the NDA will need to state which law governs the agreement. Remember England and Wales have a different legal system to Scotland. It will also need to state in which courts it can be enforced. It is important that the courts of one country are not given exclusive jurisdiction. You may want to enforce the NDA in a different country if an unauthorised disclosure is made there.

4. Before your meeting

Don’t disclose your ideas or information until the recipient has signed and returned the NDA to you. Without an NDA, you are taking the risk that others could use your ideas or information without your permission.

Always check any NDA which another party asks you to sign. Make sure it doesn’t unfairly restrict your future activities.

You could ask your potential partner or advisor if they have an NDA you could both use. Read it carefully as it might serve their interests rather better than it serves yours. If in doubt, take professional advice.

Make sure the right person signs the NDA. This could be:

• a director of the recipient company
• an officer of the recipient institution
• someone senior who has authority to give the undertakings in the NDA

5. During your meeting

You should record what you disclose at meetings or in presentations. Ask people present to sign a paper copy of a presentation, or a technical drawing to prove they have seen it.

Record what information you disclose in informal situations such as discussions or conversations. Note when and where that took place.

6. NDAs and public authorities

Public authorities, including universities, have to make information available to the public if they receive a specific type of request:

• the Freedom of Information Act 2000
• the Freedom of Information (Scotland) Act 2002
• the Environmental Information Regulations 2004 (the FOIA)

You should make sure your NDA excludes these kinds of requests if you are talking to a public authority or university.

Example NDA agreements

Example Mutual Non-Disclosure Agreement

Example Mutual Non-Disclosure Agreement

We recommend you always seek professional legal advice when entering into a contract.

Copyrights

Copyright protects the following types of work:

 

• Original literary works (includes any work that is written, spoken or sung. Tables, compilations, and computer programs also qualify for protection);
• Original dramatic works (a work that is capable of being performed);
• Original musical works (musical sounds);
• Original artistic works (graphic work, photograph, sculpture, collage, work of architecture or a work of artistic craftsmanship);
• Sound recordings;
• Films (a recording on any medium from which a moving image may be produced);
• Broadcasts or cable programmes (a transmission of visual images, sounds or other information by wireless telegraphy); and
• Typographical arrangement of published editions (of the whole or part of one or more literary, dramatic or musical work – there is no requirement that the work itself be the subject of Copyright).

 

Copyright subsists as soon as an original work is created and fixed in a permanent form, for example on paper or film.

 

A book may constitute or contain a literary work, a published edition and an artistic work. In some cases, Copyright may subsist in “new versions” of “old works” – a new edition of a book compiled of existing works may in certain circumstances be eligible for Copyright even though no new material was created.

 

As Copyright exists automatically and is unregistered it is important to keep records that show the date the Copyright work was created and that it is owned by you. You must be aware that just because you have paid for the work it does not necessarily mean you own the Copyright.

 

If you have employed someone else to design something for you, you should ensure that the copyright is transferred to you either by virtue of the terms of their employment or by specific assignment.

 

Whilst you are not required to mark a Copyright work with the Copyright symbol it may assist you in proving ownership should you wish to enforce your Copyright.

 

The usual Copyright notice is set out in the following format:

© [year of creation] [name of author]

 

Copyright allows the owner to control the way in which their material is used. The right is infringed by unauthorised copying, adapting, performing, distributing, broadcasting, renting or lending to the public.

 

Copyright can be bought, sold or licensed like all other intellectual property rights. We can assist you in preparing Copyright assignment and licence documents.

 

In the UK Copyright in a literary, dramatic, musical or artistic work lasts for 70 years following the death of the author. Copyright in a film lasts for 70 years following the death of the last to survive of the principal director, the authors of the screenplay and dialogue and the composer of any music especially created for the film. Sound recordings are generally protected for 50 years from the year of publication. Broadcasts are protected for 50 years and published editions are protected for 25 years.

Advice for Start-Ups regarding IP Protection