Intellectual property (IP) rights can be difficult to value accurately. An intangible property right, their precise economic benefits are hard to judge. Yet most are highly valuable — and a strong IP portfolio can be the key to attracting investment, particularly for early-stage companies. Here, our expert Terence Broderickoutlines the top five considerations.
1. Get it filed
Identifying your IP and seeking to protect your rights early on is the most critical step to take before approaching investors and can significantly increase your company value.
Registered IP rights — such as patents, designs and trade marks — are always an easier ‘sell’ for investors, as they are defined more clearly and have a priority/filing date to fall back on in the event of a dispute about their existence.
However, pending IP rights can also be of use. Even if they never proceed to full registration, they can provide uncertainty to competitors who may be trying to enter the market with similar products. Pending IP rights can also generate a buzz around your company when the world notices that you are innovating and trying to protect your progress.
2. Gain the complete picture
Registerable and pending IP rights aren’t always the complete picture. There are many other IP rights that could be of interest to investors, but won’t pop up on a register. ‘Know-how’, confidential information, copyrights and unregistered design rights may all subsist in your business and could even have more value than your registered IP rights.
Prior to seeking investment, it’s well worth thinking about all the IP that your business could own. Ultimately, anything that gives you an advantage over potential competitors could have both registered and unregistered IP rights associated with it.
3. Quality vs quantity
Many business owners assume that a larger portfolio is automatically more attractive to investors than a smaller, more focused portfolio. However, investors are becoming ever more IP-savvy and will often ask their own IP advisors to perform due diligence before any investment is made.
This isn’t necessarily something to fear. Investors usually look at the bigger picture before deciding on an investment opportunity — and while a large portfolio of rights might look great on paper, many could have little in the way of value or commercial relevance and could draw the scrutiny of investors.
For this reason, it’s well worth considering where your product line is strongest and has the most potential. You can then focus your portfolio to ensure that it reflects the true value in your company, rather than playing a numbers game.
4. Consider global protection
Ensuring that you protect your IP in territories that are relevant to your commercial goals is key.
International portfolios are expensive to maintain, so you need a cost-effective IP strategy that guarantees return on investment. Investors will not be impressed with you filing patent applications in 50 countries if only a few of them are of any commercial relevance.
One option to consider when seeking global protection is one of the multi-territorial treaties provided within the intellectual property system. Systems such as the Patent Cooperation Treaty (PCT), the Hague Agreement (registered designs) and the Madrid Protocol (trade marks) enable multiple territories to be pursued with less commitment at the time of filing. This can help to manage costs early on and keep options open.
5. Understand your risk
You may have a very strong IP portfolio that protects your rights in all the essential territories — but have you considered third party IP rights? Investors will expect at least an appreciation of the risk exposure they will face when getting involved with your business.
This may be in the form of performing a freedom to operate search to gain an appreciation of which IP rights could cover what you intend to sell/make. It’s imperative to at least be aware of your position regarding these searches — for instance, being clear about why (or why not) searches have been undertaken and what your search strategy is. Investors aren’t ignorant to the costs of these searches and generally understand that they can be cost prohibitive for smaller companies. However, ignorance isn’t bliss in the world of IP and investors will want you to show awareness that third party rights may exist.
Another option to assess risk may be a patent landscape search, which will show you who else is filing in your field and is likely to own patents. This could well be your main source of infringement risk, enabling you to take stock ahead of a funding round.
Talk to us
I’ll be at IPBC Europe from 27 to 29 March to discuss this precise topic with elite IP decision makers from around the world as part of a panel session.
To find out more about securing investment through IP, get in touch with me at [email protected] for a free initial chat about your needs.
