Managing IP Strategically

We are officially into Q4 and it’s time to begin your business planning for 2016. As you do so, I expect you’ll look at your financials and plan the needed adjustments to marketing, staffing, capital purchases, and other operational activities to meet your goals for the coming year. In addition, there’s a component of strategic planning which includes review of your bigger goals (BHAGs for those who know Jim Collins’ work) and what incremental steps should be taken during this year and the next to maintain focus on the bigger achievements of the company. How often is intellectual property considered in the strategic planning conversation? I expect it rarely is, yet IP can have both an immediate and strategic effect on a business’ position and competitive advantage in the marketplace.

What kinds of IP exist? The purpose of granting IP rights is to enable a creator to exclude others from copying or using the IP without permission; so it’s important that you understand how to protect the IP you have created. This is a complex area and all the nuances cannot be explained here, but below is a simple description of each the four IP categories and how protection is secured:

IP Class Definition Method for Protection
Copyright A copyright is an original work of authorship.   We commonly think of this in the creative sense – music, art, literature.   However, for your business, it’s anything you create that you believe adds value to your business and you want to protect it from others’ use or reproduction. Examples are templates, questionnaires, graphics, and logos. The author is granted copyright rights in the work as soon it’s put into a tangible form. The author has the right to exclude others from using the copyrighted materials.   The author may file for federal copyright protection which provides statutory penalties for infringement.
Trademark A trademark is a word, graphic or other item that the customer identifies with your business. We usually think of this as a “brand.” The trademark holder is granted trademark rights in the mark as soon it’s used in commerce in connection with particular goods or services. The holder has the right to exclude others from using the trademark within the industry and geography where the mark has been used. The holder may file for federal trademark protection which provides greater protection and statutory penalties for infringement.
Patent A patent is an invention for which you have been granted exclusive use. A federal patent is essential to protect the innovation during development and exclude others from using the innovation.
Trade Secret A trade secret is valuable commercial information that gives your business an advantage because you have it and others do not. The only protection for a trade secret is to maintain its secrecy.

What IP do I have? The first step is to determine what IP you have and what value it offers your business. You should also determine whether it is fully protected or whether additional protection is needed. You may have a well-recognized logo but have never pursued federal protection for the trademark. You should understand whether you are able to file for federal protection under the law. Similarly, you may have an innovation you have been contemplating and are unsure whether a patent is worth pursuing. The IP you’ve built already brings value to your business through the goodwill your customers and other stakeholders find in doing business with your brand or buying your unique product. It stands for something and should be treated as a valuable asset and protected to the best of your ability.

What’s the ‘strategic’ part? There’s the IP you know you have and the IP you can create. The value of your business will improve if you have unique, valuable assets that no one else has. Consider what makes your business unique and build IP to support that unique value proposition. What materials, branding, or inventions are you known for – or should you be known for? Create a plan to build these assets so they are a part of the package of value you can offer to your clients and transfer to a buyer in the future.

How do I ‘manage’ my IP? Strategically managing your IP includes a few essential steps. First, you need an inventory of what you currently have and what you plan to create. This inventory should be updated regularly as new ideas are generated and new assets developed. Decisions should be made as to the role of IP in the business and how best to protect it. Consider a company like Starbucks. Starbucks has dozens of trademarks which include variations on the logo and newly branded products. Each time something new is launched, they make a decision as to how that brand will be managed – what name is appropriate, is it available, how quickly should a federal trademark application be filed. Patents are similarly planned, especially since secrecy is critical and a patent has a limited life. The content of the patent application should be planned so that it can be leveraged and built upon for the future. These decisions are part of a bigger plan to ensure the company’s IP continues for its benefit as long as possible. Doing this right is essential because the consequence of an error could be the loss of protection and value to the company. It’s smart to engage legal counsel in this process.

Conclusion. IP is often an afterthought in business planning. It’s a reaction to something the business does rather than a forward-thinking part of creating value for the enterprise. Instead, it should be a part of the strategic planning conversation because it’s all about how IP can add value to your customers and your business.

May 28, 2014

adding value through intellectual property

 

Many successful businesses, large and small, are built on intangible assets or intellectual property (IP). Whether it’s a trade mark, patent, design, copyright or trade secret, each can add value to a business’s physical asset. It is important to understand your IP, the different types of IP rights, where they fit in your business, how to protect them and the ways in which you can use IP to its full potential through licensing. During this seminar we will discuss:

  • What are trademarks and copyrights
  • The basics of patents
  • How to protect IP
  • Ways to enforce IP
  • Licensing basics

Join us and learn how IP can add value to your business!

 

Location: Civica Office Building

1st Floor

205 108th Ave NE

Bellevue, WA 98004

Time: 7:30am – 9:30am

Cost:        $100

*Free to Equinox, SKCC members and presenters’ clients and guests

Register for this event

Presenter:

Lauren Burgon, Equinox Business Law Group

Keil Larsen, Equinox Business Law Group

May 15, 2014

ADDING VALUE THROUGH INTELLECTUAL PROPERTY

 

Many successful businesses, large and small, are built on intangible assets or intellectual property (IP). Whether it’s a trade mark, patent, design, copyright or trade secret, each can add value to a business’s physical asset. It is important to understand your IP, the different types of IP rights, where they fit in your business, how to protect them and the ways in which you can use IP to its full potential through licensing. During this seminar we will discuss:

  • What are trademarks and copyrights
  • The basics of patents
  • How to protect IP
  • Ways to enforce IP
  • Licensing basics

Join us and learn how IP can add value to your business!

 

Location: Southwest King County Chambers

14220 Interurban Ave. S #134

Tukwila, WA 98168

Time: 7:30am – 9:30am

Cost:        $100

*Free to Equinox, SKCC members and presenters’ clients and guests

Register for this event

Presenter:

Lauren Burgon, Equinox Business Law Group

Keil Larsen, Equinox Business Law Group

Intellectual Property and the Financials

Our guest blog post comes from Dennis Purvine of CFO Selections.  Dennis is a CPA and CFO and has worked with companies in all stages of development.

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Intellectual Property (I.P.) can be protected by patent, copyright, trademark, etc.  Companies that create, or purchase, intellectual property presumably create value for their business. (More on this “value” later.)  As such, the costs incurred in acquiring the I.P., whether done in-house or purchased from an outsider, should be capitalized and shown on the balance sheet. Showing the intellectual property on the balance sheet reminds everyone, including bankers, shareholders, and eventually the potential purchasers of the business, that the company has intellectual property which may increase the company’s value.

The actual value of the I.P. is determined by the competitive advantage that the I.P. gives the company. For example, the company has a patent that allows them to make an item that is superior to the competitor’s items. This may result in a higher unit price for the item and/or an increased number of units sold – simply because they are better. Or the company may have a process that allows them to make an item, of the same quality, for a lower cost than their competitors. Again, this places the company at a competitive advantage.

This competitive advantage can be measured in terms of greater sales and/or profit compared to their competitors. When a company is being valued, either as a potential purchase or for succession planning, the value that the I.P. adds is taken into account. One client of mine produced a copyrighted product that was of much higher quality than the competition. As a result, his company produced and sold more than 90% of these items that were sold in the United States.  (Please do not tell the Federal Trade Commission!)  When the company was sold, the copyright increased the price of the sale. I have also seen companies purchased mostly to gain access to their intellectual property.

Common Mistakes in Patent Protection

Our guest blog post comes from Jim Rutter of Ruttler IP Law.  Jim will be our guest speaker at our June 23 Equinox Focus Event “Protecting and Leveraging Your IP”.

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The first major mistake that is made with patents is disclosing an invention prior to filing a patent application.  Disclosure could include offering to sell an invention, actually selling an invention, distributing advertisements about an invention, publishing an article about an invention, or any other act that causes the invention to be known to the public.  The issue with disclosures is that they result in loss of the ability to seek patent protection outside the U.S. and trigger filing deadlines in the U.S. that must be met to prevent loss of patent rights.

A second common mistake that is made is not utilizing provisional patent applications.  Provisional patent applications are relatively cheap and informal applications that can be filed quickly.  They result in a patent pending status, allow disclosures to others of the material contained therein, and provide for up to a year before a more formal application must be filed.  Provisional applications are excellent tools for entrepreneurs with limited initial resources because they preserve patent rights for minimal expense while the invention is further developed.

A third mistake made is not considering design patent protection.  Most believe that patent protection is only available for functional inventions.  This is not the case as there is also patent protection available for new creative designs.  Protectable designs can include new product shapes, packaging shapes, website interfaces, font styles, and the like.  Design patents are less expensive to obtain and can be obtained quite quickly.