Special Report: IP: All-round business asset
Patrade A/S are making intellectual property rights the ‘shield’ and the ‘sword’ of your business.
Simone Frattasi (left) and Leif L Nielsen (right)
The realm of intellectual property is a constellation of associated rights whose business potential is still vaguely known and is thus waiting to be unleashed. A correct and useful knowledge of intellectual property rights (IPR) is not widespread throughout society and remains a matter mostly limited to relatively few professionals, either employed in dedicated IPR departments of larger R&D companies or in IPR consultancy firms.
Patents are often interpreted according to a common general knowledge which has been built up on numerous misconceptions with regard to their usefulness and cost effectiveness. Filing a patent application, for instance, is considered – wrongly or rightly – a sign of overt geniality, the only means to protect a private inventor’s idea against malicious buyers and partners, an extremely high expenditure with no practical use, and a major obstacle to development and trading.
The reality, however, is that the palette of IPRs, and its complementary legal tools (e.g. agreements related to non-disclosure, consortium creation, R&D consultancy, transfer, licence, etc.), is a powerful instrument to boost an upcoming business (e.g. a start-up, a spin-off or a joint venture) and strengthen an established business (e.g. an SME), not to create one. Indeed, besides an idea (not necessarily entailing a breakthrough as many researchers wrongly assume), the creation of a new business involves, amongst other factors, a market, a viable business model, a team of highly committed persons having interdisciplinary backgrounds, and trustworthy partners and investors. At each stage of a business, from its creation to its maintenance and, in some cases, to its exit, its intellectual property must be adequately protected for preventing harmful consequences while concurrently increasing the probability of its success, growth and survival.
An example of the process
Let us take the example of an upcoming start-up. Shortly after the idea is conceived, once the necessary personal reflections and initial business considerations have been carried out, the team should write down a business plan. As a first aspect, the latter must embrace a realistic assessment of existing competitors. In this context it is common, deliberately or not, to underestimate the importance of conducting an IP search along with a market search.
Typically, the result of an IP search would offer many powerful business-related indications in respect to (amongst others): deriving the actual interest and the geographical interest in a technology or a design by looking at the evolution of filings during the years and the number of filings per country/region; avoiding re-inventing and re-developing existing products and services; designing alternative solutions or improvements with respect to the state-of-the-art; discovering further competitors along with their market span; and finding business partners. Besides an assessment of the likelihood of protecting a technology or a design with an IPR, entrepreneurs often ignore the fact that the competitors found in the IP search may own a portfolio of active (even dormant) rights that could represent a serious hindrance to their future business.
As a second aspect, IPRs shall be taken into account in the budget section of the business plan since they represent both an expense and a source of income. As a consequence, preliminary strategic and economic considerations concerning trademarks, designs and patents shall be performed.
Normally, people consider IPRs as the ‘shield’ of a business, i.e. a protection from competitors inventing or copying the same idea. That they can also be turned into the ‘sword’ of the business, thanks to their direct and indirect economic benefits, can, however, be overlooked. The direct benefits refer to the extra profits resulting from: 1) a stronger market power (i.e. the possibility to raise the price for a product/service without losing customers) caused by the economic monopoly deriving from excluding the competitors from exploiting the company’s IP in a certain geographical area; and 2) transferring or licensing the IPR against a lump sum of money or a royalty agreement. The indirect benefits refer to a more defensive strategy based on cross-licensing the IPR against a free/reduced licence for another IPR.
Next, a partner with the necessary expertise to develop a demo/prototype, for example, will be contacted. Prior to a meeting, the team must reflect on how to maintain confidentiality with respect to the IP involved and with respect to the business itself, in case the partner will hop on or off the project. At this point, most entrepreneurs do request the partner to sign a non-disclosure agreement (NDA) as a safeguard against an abuse of the information that will be disclosed in the meeting. Nonetheless, both parties rarely know the utility and the implications in terms of enforcement of an NDA, which may in fact often remain an abstract document and, consequently, an empty threat.
Conversely, an NDA specifying the content that will be presented during the meeting (e.g. a PowerPoint presentation, a video, etc.), in combination with the filing of a patent application and/or a design registration, provides the most effective form of protection against malicious counterparts with respect to the product/service involved and to the overall business strategy.
What is noteworthy in the case of a patent pending in a certain country/region, is the use of the formulation PAT PEND to preventively avoid competitors that enter the market in that geographical area. Moreover, an intentional patent pending strategy, i.e. an IP strategy with no final intention to get a patent granted, may be advantageous for companies developing products/services with a short lifetime so as to gain the market while keeping the IP expenses at a minimum.
At various stages of the business process the team would need to interact with investors to finance, for example, the development and testing of the demo/prototype and the launch of the product/service on the market. In this respect, IPRs are again an asset since few investors would risk large sums on a business not associated with any IPRs but only to trade secrets. Especially for start-ups with unproven track records, an IP portfolio signals professionalism and quality, which would result in the team being taken more seriously by investors.
In case the company has neither the wish nor the ability to proceed further, several exit strategies are conceivable at predetermined milestones such as the completion of development work or the product/service being ready for commercial distribution. At these stages, contacts to buyers or licensees must be undertaken. In the case of buyers, an IP due diligence will be performed to derive a value for the intangible assets of the company. Note that for start-ups and spin-offs, IPRs are in fact the main asset.
Although we have referred to a start-up, similar aspects are to be considered for spin-offs, SMEs, etc. In any case, bear in mind that IPRs are not only a means of protection but also valuable assets during any stage of a business.
Patrade
Patrade is an IP firm consisting of a patent department and a trademark and design department, including authorised European patent, design and trademark attorneys. Moreover, Patrade is a member of a worldwide network of agents and the Patrade Group , which includes the law firm Patrade Legal. Thus, Patrade has broad in-house expertise in all aspects of IP, including but not limited to the following: IP consultancy with a business focus; IP planning and budgeting; execution of IP searches; drafting, filing and prosecution of IP; IP monitoring; freedom-to-operate analysis; IP infringement evaluations; IP management; IP licensing and transferring; and IP defence and litigation. Also, our attorneys assist our clients in finding public and private funding opportunities. Our technical competencies span from mechanics to chemistry, from software to electronics and telecommunications. Thus, we can definitely help you in building up and managing a valuable IP portfolio.
Patrade is an expert member in ‘Vision2020: The Horizon Network’. In particular, we can assist you in IP issues related to your Horizon 2020 proposals and projects such as drafting or legal counselling on grant agreements, consortium agreements, partnership agreements, researcher agreements, joint ownership agreements and confidentiality agreements.
Simone Frattasi PhD EE, MSc EE
Patent Attorney
[email protected]
http://dk.linkedin.com/in/simonefrattasi
Leif L Nielsen
CEO, Partner
European Patent Attorney
Patrade
+45 7020 3770
http://www.patrade.com
