Registering your Intellectual Property does not have to be the absolute endgame. It can position you and your business for other opportunities. Five are outlined below.
In last week’s post, Protecting your Intellectual Property in the Caribbean, we sought to provide some guidance on the subject of Intellectual Property (IP) by highlighting key steps and considerations that ought to be explored. The main reason for securing IP protection is to safeguard one’s creations from unauthorised use. However, through those very rights, provided your IPs are considered valuable, there may be opportunities to make them work for you and your business, and even to generate much welcomed revenue.
1. Branding
Figure 1: Highly recognisable pose from international sporting figure Usain Bolt (Source: Spread Shirt)
Creating a strong and distinctive brand is one of the mainstays of successful business development. Typically, we relate the term “brand” with logos, trademarks and other designs that identify a particular business. However, it also comprises critical elements such as the business’ reputation, personality, ethos, product and/or service quality, differentiating factors from other competitors, and even customer expectations. Hence the importance of the brand should not be underestimated, and ought to be integrated into and developed as part of the wider corporate strategy.
Nevertheless, having recognisable images representing your business and/or its offerings can offer immeasurable value by providing a foundation for strong and favourable associations to be made to your organisation’s brand. Figure 1 highlights the association we readily made to highly recognised image: that of sporting phenom, Usain Bolt.
2. Licensing
Having registered your IP, licensing opportunities could be explored for their revenue generating potential, along with providing channels for wider distribution of your creations.
A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). (Source: WIPO)
Depending on the nature of your business, licensing could be considered for the production and distribution of trademarked and copyrighted material, or even for the manufacture of patented tech/IT designs and processes.
3. Franchising
In a similar vein to licensing, franchising authorises another entity to operate using your business model, and frequently includes use of your business or trade names:
Franchising may be defined as a contractual arrangement under which an entrepreneur or enterprise (the franchisor), who has developed a system for conducting a particular business, allows other entrepreneurs or enterprises (the franchisee) to use that system in accordance with the prescriptions of the franchisor, in exchange for a fee or other monetary consideration. (Source: WIPO)
With regard to franchising, there will likely be a variety of IPs for which permission must be given, such logos, trademarks, patents, and trade secrets. Hence all of those important IP elements ought to be appropriately registered in all jurisdictions when the franchises will operate.
4. IP as an asset
IP is generally considered an intangible asset of any business, and could be a key contributor to the overall value of a business, as well as its impact in the industry and markets in which it operates. Over the last several months, most prominently with the uncertainty surrounding the BlackBerry smartphone and its manufacturer, Research in Motion, considerable attention has been given to the value its patents, rather that the value the current business, should it be subject to a takeover. For companies that are ailing, sale of some of their IP, specifically patents, has proven to be extremely lucrative, as indicated in the following examples:
- the sale Motorola Mobility to Google for USD12.5 billion included the transfer of 24,500 patents owned by Motorola
- software firm, Novell, sold 880 patents and patent applications for USD 450 million
- telecoms equipment manufacturer, Nortel, sold 6,000 patents for USD4.5 billion. (Source: The Economist)
5. IP as a financing tool
Recognising the value of IP as an asset of a business, there is a growing focus on using those properties and right to access financing. In addition to licensing and franchises, which can provide regular and consistent revenue, other options that are regularly implemented include the auctioning off IP, and using IP as collateral.
When persons or businesses decide to auction their IP and associated rights, it is usually done in order to secure a quick sale. However, an auction might also be considered when a business has been wound up, and the registered IPs have become inactive and may remain dormant indefinitely. The auction environment provides IP right holders with access to a market of potential buyers, to which they might not otherwise be exposed, and may foster a more lucrative sale
Collateralising IP is not yet a standard method to secure lines of credit at banks and other commercial lending institutions, particularly in the Caribbean. However, the extent to which your business’ IP can be valued, and its impact on (or contribution to) your business’ success can be determined, you may be able to leverage it to increase the financing offered. However, and at the very least, IP can strengthen your negotiating position and offer some additional comfort to lending institutions, which could allow you to secure more favourable terms.
Image credits: Spread Shirt; Stuart Miles (FreeDigitalPhotos.net); 401(K) 2012 (flickr)
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How is the Value of your IP calculated? What are the methods used?
VLScully: You asked possible methodologies that are employed to value Intellectual Property.
Firstly, I think it is helpful to regard IP as an asset ( in the same way you would, Business Goodwill or a business itself, for example ). And, as far as I can see, this regard is the thesis of this article.
Viewed from this perspective, all the standard methodologies used in valuing a company can thus be applied to value IP: Income Approach; Replacement Cost; Market Comparability Method…. to name but a few.
Like asset amortisation/depreciation, different methods can yield vastly different values. In that vein, like business valuation, IP valuation is more a symbolic, I would caution, than a substantive approach to establishing true value.