From adversity comes challenge and opportunity, which in turn creates the perfect environment for innovation, and from innovation comes intellectual property.
Kiwi ingenuity and the protection of intellectual property (IP) should go hand-in hand. IP is an intangible asset that comes in many forms: it could be a patent for your invention, a trade mark for your brand, copyright in the expression of your idea, or confidential information in your business strategy. In this article we discuss how to best realise value from your IP in order to get the best return from your creative output.
It’s helpful to think of commercialising IP as a matrix that should be put in place as part of good business practice and asset management. There are five key steps that form what we call the ‘IP Matrix’:
IP Matrix = Identify – Protect– Exploit – Enforce - Sell
Identify: Identifying the IP in your business means thinking about what IP protection would look like for the product or service that you are offering. For example: (i) a brand name could be an unregistered or registered trade mark; (ii) your product packaging could be a registered design and/or have copyright protection in that packaging design, and/or the artwork or images used on the packaging; (iii) your invention may be protected by a patent; (iv) a recipe or formula could be a trade secret; and (iv) the data and commercial strategy of your business may be confidential information.
Protect: Protecting your IP means how to assert your ownership and put others on notice of your ownership rights. For registrable IP(such as for trade marks, designs and patents) you will need file an application for registration through the Intellectual Property Office of New Zealand. For non-registrable IP (such as copyright) you will need good documentation and records of development to provide proof of authorship and a clear notice of ownership. For IP that is created in your business you may also need contracts recording ownership of any IP that is developed –this is especially important to cover-off in your agreements with employees, independent contractors, joint business ventures and service providers. You may also wish to set up a separate company to own the IP, and a related company to market and license that IP to third parties – this protects the IP owning company from liability if there are claims made against the marketing and licensing company.
Exploit: Exploiting your IP means getting the most value out of your IP for your business. This will depend on the IP itself and the nature of your business. For some forms of IP, value can be generated through use, which will in turn result in goodwill - a measurable business asset. For other forms of IP, exploitation takes the form of an IP licence which allows others to use the IP in specific ways, in return for a royalty or licence fee.
Enforce: Enforcing your IP means maintaining and protecting the validity of that IP. Keeping the value in your IP will depend on your ability to enforce it. Having clear ownership and adequate protection (such as registration or a copyright notice) in place for your IP will help prevent competitor use and ensure others cannot trade off your goodwill. Taking action against those that infringe your IP is critical.
Sell: Selling your IP requires the ability to transfer ownership of your intangible assets. IP can be sold by a business through either a share or asset sale. In the case of a share sale, the purchaser will acquire the IP automatically (but will expect appropriate liability/ownership/validity warranties). For an asset sale the IP must be identified and transferred by agreement (with the purchaser requiring IP identification/ownership warranties). Recording the transfer of ownership of IP is often required – this will differ depending on the nature of the IP transferred and whether it is registered or unregistered.
Having an IP Matrix will enable your business to develop, protect and commercialise its IP and ensure that its value is maintained. If you need further advice on how to put an IP matrix in place for your business please get in touch.