Building wealth from your intellectual property assets

September 2016 | EXPERT BRIEFING | INTELLECTUAL PROPERTY

financierworldwide.com

You run a business – you are embroiled in the day to day activities: leads, sales, even staff; do you have time to consider the hidden gem – your intellectual property (IP)?

Your IP could be as valuable as your plant, premises or stock. It could be your single most valuable asset. Therefore, you need to know the value of your IP assets when seeking funding, entering into joint ventures, if you decide to merge or acquire another company and even during bankruptcy.

IP varies from business to business but every business owns some IP. However, one key way of identifying IP is to ask a professional to carry out an IP audit. Copyright for example, does not require registration. All written (and typed) documents; technical drawings, website content, handbooks, marketing material and photographs will contain copyright. A further valuable form of copyright is software. If your organisation is IT based, copyright will exist in the coding of that software. Do you sell software to your customers, or have you created some unique software for your internal business operations?

For those day to day activities mentioned, what would keep you awake at night if it walked out of the door? Would it be a secret ingredient in your product? A manufacturing process, which you know only your company follows? Would it be your client database, or your training manuals?

Not all IP is immediately valuable. Unless your IP assets help to create, maintain or increase cash flow, they may have no financial value. However, one thing is for sure – once you have recognised the value in your intellectual property assets, you are likely to increase the value in them going forward.

Does any element of your IP need registering? If you have a novel product or process, then a registered patent could be relevant. If you are in the process of developing something new now, keep it confidential, use non-disclosure agreements with those people you are discussing it with and see a patent agent as soon as possible.

Once you have identified your IP and have taken steps to register those rights where possible, you have an asset which can be valued and added to your bottom line. In the marketplace, a patented product or a brand with a registered trademark can be licensed to others in order to bring in a revenue stream.

If you understand the value of your product based on its recent track record in the marketplace, this could establish the price that people might pay for your IP. Your IP is an asset which you can sell wholesale, but you would not want to do this if it is the crown jewel in your business. If you are looking to merge with another company, however, having those IP rights identified, protected and dealt with correctly can significantly add to the value put on your business. This results in a higher purchase price, or less shares given away for the funding you seek.

Valuing the IP will include estimating the economic life of the intellectual property rights (IPR) and estimating the income over the years to come, whether that relates to royalties payable from licensing deals or an increased sale price on your products.

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. The strength of the IPR, the size of the potential market, the nature of the competition and the cost of registering, enforcing and defending the IP will need to be taken into account, through auditing and recognising intellectual property in your business will strengthen your market position.

Deborah Niven is a partner at gunnercooke LLP. She can be contacted on +44 (0)7534 903 714 or by email: deborah.niven@gunnercooke.com.

Deborah Niven

gunnercooke LLP