Insurance · 12 December 2016

Making money from intellectual property

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Businesses can sometimes be bought and sold based on the strength of their intellectual property portfolios
In the second in a new series on intellectual property, Grid Law founder David Walker considers the various ways small business owners can be making money from intellectual property.

In the last article we looked at some of the most common forms of intellectual property a business may own. In this article were going to look at what makes these intellectual property rights so valuable.

If you have a technology or product based business you may own a portfolio of patents and/or registered designs. These can be valuable in a number of ways.

First, you can develop, manufacture and sell your own products. Your patents will protect how your products work and your registered designs will protect how they look.

Your patents and registered designs will give you a competitive advantage by helping prevent your competitors from developing and selling competing products. Now, this doesnt mean you can prevent all competition, but a comprehensive portfolio of rights can enable you to offer your clients something unique and valuable, so you can price your products accordingly.

A strong portfolio of patents can also enhance a company’s profile and help demonstrate how innovative it is. Remember the advert for the new AudI A6 from a few years ago? The final line was:

to date, NASA have filed 6, 509 patents. To get to the A6, AudI have filed 9, 621 patents.”

This leaves you in no doubt how important being at the forefront of technology is to Audi.

If you don’t want to, or don’t have the facilities or resources to develop, manufacture and sell you own products, you could licence your intellectual property to someone who does.

A licence is a contract that gives the other party permission to use your intellectual property on conditions agreed between you. In exchange, they pay you a fee, known as a royalty.

Owning a portfolio of rights which you licence to other people enables you to run a very lean operation. You can have a very profitable business with hardly any overheads which is an extremely appealing prospect for some people.

I have clients who do this. They are very talented designers but for them it would be almost impossible to run a business producing and selling the high volume consumer goods they design.

Therefore, they focus their efforts on designing new products, which is what they are best at, and licence their designs to another company that has the necessary resources to take the products to market.

Brands, protected by trademarks, can be the most valuable intellectual property rights of all. This is because many people will make a purchasing decision based on the strength of a brand over any other feature.

Just like patents and registered designs, trade marks can be licensed to other businesses. This is effectively how franchising works.

A successful business (the franchisor) licences its brand and system of working (which can also be protected through the strategic use of intellectual property rights) to another business (the franchisee) which then operates strictly within a set of guidelines.

Franchisors can charge hefty fees for the rights to use their brand and system and people will happily pay them. Franchisees know they stand a much better chance of running a successful business under the franchisor’s brand than creating their own.


 
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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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