Work - WAH Business Archive 06-07

How To Value Your Intellectual Property

21 Dec 2006

How To Value Your Intellectual Property

by Richard Nicholas, IP solicitor with Browne Jacobson LLP

Do you know what the intellectual property in your business is worth? If you answered "no", you're certainly not alone. According to a survey by Browne Jacobson, a leading UK law firm, a poll of 220 UK business owners found:

- 80% were unaware of the value of their intellectual property assets,

- 55% believed (wrongly) that registering their company's name with Companies House would guarantee them the exclusive right to use that name; and

- Less than half (48%) had any clear policies in place for protecting intellectual property rights

Does it matter?

Well, frankly – yes! And for three very good reasons:

1. Accounting standards require businesses to give a value to intangible assets. While there are different methods of valuing intellectual property, there are certain processes in place that Her Majesty’s Revenue & Customs (or indeed anyone else auditing your business' accounts) may expect you to have complied with.

2. If you are not aware of the intellectual property assets that you have, then you may well not be protecting it properly. Registered rights, such as trademarks, domain names and patents require positive action (registration and payment of a license fee) to ensure that no one else can use them. Other unregistered rights such as copyright or design right, require you to keep good records and to ensure that you have an agreement in writing with any third party that you commission to produce bespoke material on your behalf, whether that is a new logo or a tailored computer system.

Did you know that if you have not registered a potential patent or design but use it or disclose it, you are likely to lose your right to register it, and the potential income and protection that that might entitle you to?

Alternatively, it may be that you are allowing contractors or suppliers to use your brand or technology without properly licensing and controlling that use and ultimately, reducing the bottom line value of your business.

3. Intellectual property assets are valuable! They can be used to raise finance, can be licensed as a valuable source of income and can be used to resolve disputes. They should not be overlooked as an income-generating asset. Companies that fail to take account of their intellectual property rights are missing out.

What can you do about it?

Of course the ideal solution would be to get an independent third party to come and audit your business, to work out what intellectual property rights you have, whether or not anything needs to be done to ensure that those rights are enforceable, work out ways to best exploit those rights and to put a value on those intellectual property rights, according to recognised accounting principles.

We can help you do this, having audited the full spectrum from relatively new start-ups to some of the UK's leading brands.

Even without instructing a law firm, there are a number of straightforward steps that you can take to make sure that you are protecting your inventions in branding, advertising, research and development.

First – take a look at some of the assets of your business, for instance:

- Your company name – is this a trading name that you are using or a name registered at Companies House?

- Your brand – are you using a logo in the provision of your services? Would your customers link that brand with your products or services? If so, then you might want to consider registering a trade mark. If the logo was developed by a third party have you made sure that there is a letter assigning the copyright in that logo to you?

- Your website – it’s likely that the content of your website will attract copyright – however whether that right vests in you or not might depend on the terms of your agreement with your designer (if you used one)

- Your domain name – i.e. the address of your website – do you own the .com/.co.uk?

- Any inventions that either your business develop or own. Do your employment contracts and/or consultancy contracts deal adequately with the ownership of IP rights?

- Any designs that you have applied to your products to make them distinctive.

- Any confidential information or know-how that your business uses to give it a competitive edge, including databases of customers and suppliers – how is that kept secure?

- The people who work for you. How is your business protecting those inventions? Do you have any documented procedures in place for making sure that IP rights are considered as soon as a new concept or invention is made?

What's Next?

Once you know what you have – you might find that you want to register certain of your rights to ensure that you have exclusive use of those rights.

In doing so, you will need to consider where and how those rights should be registered (for example, trade marks are registerable by territory and by class of goods or services).

There is a cost involved in registering and keeping registered rights registered, so you will need to ensure that registration will be of sufficient benefit to your business to justify the costs.

Finally, having worked out what you have and how to protect what you have, you may want to work out how to get best commercial value from what you have, for instance by licensing rights to gain revenue and reach a greater audience.

In doing so, you will need to ensure that the agreements that you enter into do not damage your reputation, or alternatively, compete so successfully that your business is no longer able to make best use of those assets.

Having robust agreements in place, procedures for protecting intellectual property rights and regularly reviewing your intellectual property portfolio can be a significant boost to your business, both in terms of income generation and its attractiveness to investors and partners.

If you don't know the value of your intellectual property assets you are probably missing out.

For the sake of your business join the 20% club who know the value of their intellectual property assets, and are prepared to use them!

(c) Richard Nicholas of Browne Jacobsen LLP

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