Intellectual property (IP) is an important and valuable asset that takes the form of registered and unregistered rights. In many businesses, IP will be a key commodity – whether it's your brand name, technology that you have developed, or the "secret sauce" that makes your business different.
It is important to take stock of what IP assets your business has so that you can take steps to protect them. Not doing so may leave you unable to stop competitors taking advantage of those elements that make your business offering unique. IP is a key issue when carrying out diligence on any investment or acquisition.
What types of IP are there?
Unregistered rights arise automatically upon creation. Registered rights are subject to a formal application process and must satisfy set criteria to be registered. They are granted by national or supranational registries, for example the Intellectual Property Office in the UK. Some IP is only protected for a set period of time. Other rights can continue forever.
The main types of IP include:
- Trade marks – protect the identification of the source of a product or brand, for example, business names and logos. Trade marks can be registered or unregistered. A registered trade mark provides the holder with a monopoly right in the mark for the goods and services for which it is registered. Unregistered trade mark rights arise when a business has built up goodwill in its brand or trading name and may provide a basis on which to take action against a third party doing something which creates confusion amongst the public ("passing off").
- Copyright – protects the form of expression of ideas, not the ideas themselves - such as website content and computer code, script or text, or an audio or film recording. Copyright arises automatically on creation of an original work.
- Design rights – protect the appearance of a product, such as its shape, features, patterns or designs Design rights can be registered or unregistered.
- Patents – protection is granted for a new invention. This can involve an inventive step and be capable of industrial application, for example a new drug, innovative technology or a new manufacturing method. Patents provide a time limited monopoly, in return for which the applicant must share its invention with the world at large.
- Confidential information and trade-secrets – this can be the most valuable asset to a business in the event that an invention may not be patentable. It can take any form, but some examples include source code and algorithms. Action can be taken if this confidential information is disclosed without permission.
Other rights include rights in domain names, plant breeder rights, and rights in databases.
IP rights can give businesses with innovative products a competitive edge on the market by protecting the product from being copied by others and giving the rights holder relief when copying takes place, either in the form of a court order compelling the other party to stop, or by awarding damages.
On the other hand, as an asset, it can be used as a revenue generating tool by being commercialised through sale and licensing arrangements. Licensing arrangements can provide a steady form of income by allowing others to use the IP for a fee which can be calculated using a variety of factors. It's important that you think carefully about the terms of any licence agreements, particularly where the licensee is being granted any form of exclusivity; whether the licence should be time limited or perpetual and what the terms are around the royalty mechanism.
Make sure you get ownership of the IP that your business creates
When you are considering new ideas, branding or designs, for example, it is important to document everything and ensure confidentiality agreements are in place with anyone who has knowledge of the idea. It is also important to consider the IP rights of others – investment should be made in proper clearance searches to check whether there are any existing rights that are identical or similar.
IP is generally owned by the person who creates it. If that person is an employee, then the standard position is usually that it will belong to the employer. However, should you engage a third-party consultant or company to create on your behalf, ownership of those IP rights won't transfer unless there is a written agreement in place. in writing.
Top five recommendations
- Ensure that everyone involved in the business and developing IP is either engaged under a contract of employment, with detailed IP provisions or they have entered into a written assignment of the IP that they create.
- Carry out appropriate searches in key territories before choosing your trading name, brand or logo. If you don't do this, and your brand infringes a third party, then you may incur the costs of an expensive rebrand (and possibly be liable for damages).
- Use a non-disclosure agreement (NDA) when sharing confidential or proprietary information with third parties. Nevertheless, do not just rely on the NDA. Only share what is necessary for the purpose and make sure you are comfortable sharing the information with that third party.
- If your business is developing anything that is potentially patentable, ensure you keep it entirely confidential and engage a patent agent or attorney to obtain advice on its patentability.
- When using third party IP, ensure that you obtain an appropriate licence. Think about what sort of rights you will need. How will you use that IP? How dependant is your business on it? If it is core to your business, then you don't want the third party being able to terminate it at will.
Finally, make sure you maintain clear records of the IP that you develop and intend to use. Doing so makes it much easier to take or defend infringement actions. It will also give potential investors comfort when they carry out their diligence on your business.
If you would like to discuss the IP that your business uses or has created, or how you can protect or assert those rights, please get in touch with me or one of our IP specialists.
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