Don’t underestimate the power of intellectual property in 2023
Economic headwinds have created a challenging environment for start-ups that they must confront in order to grow this year. The risk of devaluation could lead founders to attempt to streamline costs by foregoing expenditure on generating intellectual property (IP) assets, but such actions are too often taken at the expense of long-term success.
The temptation to relegate IP assets to the status of an optional extra that might be considered nice to have but not essential for business growth during periods of economic uncertainty is a concerning trend that will have a significant impact on the long-term success of many new ventures.
Start-ups are at particular risk during this challenging economic period but taking action now to increase the value of their enterprises will safeguard founders against the worst impact. In fact, having IP assets creates a more robust and commercially stable product but knowing how to go about capturing them in an efficient and cost-effective way is essential.
IP assets – particularly registered IP assets including patents and trademarks – have a tangible value that directly correlate to the overall value of a company. And if founders take a sensible approach to pursuing protection, the value gained can and should be many multiples of the investment put into securing the asset.
Robert Lind, Partner at Marks & Clerk and author of The IP Driven Start-up, commented: “For many start-ups, critical IP assets will simply have been overlooked in the journey from foundation to exit, meaning that the company’s value will be determined primarily by unsecured know-how, trade secrets, people and relevant contracts.
“Capturing generated IP often doesn’t feel affordable to start-ups and during periods of extreme economic uncertainty, the unpredictable process of securing IP assets further underscores these reservations. However, expenditure on IP should be viewed as an investment in the long-term future of the business, as a means by which to enhance its commercial value.
“The inherent value of an IP portfolio must though be coupled with precise management and presentation. Being able to demonstrate a systematic approach to IP, crucially with written procedures, is critical, as is the retention of properly signed documentation – without which the value of securing the IP can be easily undermined.”
Beyond the direct contribution to the financial value of a company, securing IP assets also has advantages that contribute to the success of start-ups – primarily surrounding innovation. IP-driven start-ups are more likely to create innovative products and services that can be patented, often addressing real-world problems that in turn are eligible for R&D funding.
Moreover, pursuing an effective IP strategy signals ambitious but shrewd vision to investors and partners, which will inspire confidence. It also provides greater awareness of competitors, which enables founders to both identify deficiencies that they can improve on and steer their own products and services into markets with less competition and a higher chance of success.
Lind continues: “It doesn’t all have to come down to registering assets, there are significant rights attached to unregistered assets – such as know-how, trade secrets and copyright – but founders must know how to maintain suitable records of these unregistered rights in order to enforce them with any credibility.
“But their value should certainly not be underestimated. Even if they remain unregistered, many IP assets will remain critical to achieving a successful launch of a product or service.
“Investing time and energy into understanding IP from the off will pay worthwhile dividends for founders in the long-term and we hope this guide will prove a useful resource for those who don’t know where to start but want to understand more.”