Members Only

PHASE 3

E-Class 9
Renovating INTELLECTUAL PROPERTY


 

In this eclass we are looking at how you can create more value and profit in your business through your Intellectual Property (IP).

We’ll start by defining what IP is and why it is valuable, and then show you how you can create, protect and strengthen you IP, and how you can use it to add value to your business.

 

What is IP?

“Intellectual Property relates to the unique property of your mind or intellect. It can be an invention, trade mark, original design or the practical application of a good idea. In business terms, this means your proprietary knowledge – a key component of success in business today. It is often the edge which sets successful companies apart, and as world markets become increasingly competitive, protecting your intellectual property becomes essential.” – source: www.ipaustralia.gov.au

IP can also be viewed as “intangible property” and when referred to in a business it usually has commercial value.

Most people think of IP as patents, but there are many other ways of claiming and registering IP:

  • trademarks
  • patents
  • copyrights
  • registered design rights
  • legal documents

 

“Trade Secrets”

Most small businesses don’t have the funding to register patents, or don’t have IP that is worth taking through this process. But that doesn’t mean that you don’t have valuable IP that you can protect! You also need to consider your “Trade Secrets”, which is the most important area of IP value for a small business.

“A Trade Secret is any secret information that gives one an advantage over competitors”

Possible Secret Information could include:

Technical information, financial information, customer lists, supplier lists, drawings, plans, designs, forecasts, software, source code, chemical formulas, methods of doing business, processes, copyrightable material and patentable material

 

Other IP to consider that we typically see in businesses include:

  • Business networks and relationships that you have built up, not just customers and suppliers, but other professionals in your industry – especially ones that your competition don’t have
  • Your business operational systems such as for getting clients, running the business
  • Your unique business methods and industrial processes eg how you can bake 500 cakes in 15 mins
  • The secret ingredients that go into your product eg 12 secret herbs and spices!
  • Your knowledge bank – that is your specific expertise around your service or industry that usually gives you your competitive advantage
  • Your customer details down to who they are and their specific requirements they may have that maybe your competition don’t know about.
  • Your relationship and years established with your database/clients
  • The way you go about employing people such as the specific selection criteria, and even the actual individuals employed
  • The way you identify new markets (eg on the net) Basically any “secret” knowledge you have that gives you some competitive advantage.

 

WHY IS IP VALUABLE?

IP increases value in a business by helping to make it more competition proof. The more unique and protected the intellectual property, the lower the effect of the competition, so the more valuable the business is.

This is really important to understand because from a buyer or investors point of view this can be a huge factor in helping to “de-risk’ your business in their eyes and by doing this they place more value on a less risky business.

3 key advantages to you:

  1. Promotes investment
  2. Provides security for a buyer or investor
  3. Demonstrates you are serious if your are thinking of selling or finding an investor

Our experiences are that investors and high net worth buyers want to know about the IP of a business, and want to see that it is protected.

Assets such as software, formulas (for food, cosmetics or chemicals), improvements to machinery, processes, packaging, business plans, publicity, branding, data bases, client lists, routes, distribution channels, plans, logos, slogans, trademarks, designs, complied information, photographs, inventions, magazines and prototypes among others, are often times considered as working material, and not protected. Therefore, they lose the great value they represent.

Some other advantages of having valuable IP:

  • Consumers will associate the trademark with a source (your company) or quality (the best) of goods/services
  • Consumers will seek out a company or a specific product based on the trademark
  • Enhances brand value – distinctiveness, familiarity/recognition, creates levels of connection among a brand family
  • Prevents competitors from copying you and leveraging your goodwill, thus saving you loss of profits

 

How to strengthen your IP and increase the value or your business…

The best and fastest way to add value to your IP is to protect it! If you can show a buyer that your IP is well protected, then their risk is reduced and your business becomes more valuable. So your first step is to take steps to protect your IP, and then secondly you need to “prove” or be able to show a buyer how it is protected.

The 3 main legal mechanisms for protecting intellectual property rights are:

  1. trademarks
  2. patents
  3. copyrights

In larger businesses, a great deal of money may be spent developing and protecting intellectual property by taking out complex and expensive patents and then aggressively protecting them, pharmaceutical companies for example.

In smaller businesses and online business this is often not practical at all as it is too cost prohibitive and sometimes not appropriate as you may not have many things you can easily patent.

In our experience, the best thing to do in a small business is to look at all the unique processes in the business and determine what you can protect, and what new IP you can develop. Trademarks are a cost effective way to protect names, symbols and logos.

Sometimes it’s better to just create your own proprietary information or processes, and take measures to keep them secret from your competition. You can do this by:

  • Keeping key customer and supplier names confidential
  • Having employees sign contracts with non-compete and non-disclosure clauses
  • Limit access to secrets or proprietary information by securing computers and Internet, locking offices and not posting confidential information (seriously!)

For example, we worked with a small building company that developed a software system for quoting jobs. It wasn’t patented, but a large publicly listed company saw the value in the system and bought out the business to get access to the software (because that is easier for them than trying to develop it from scratch themselves).

The main thing is you must be able to identify your IP, articulate it, and then set about protecting it wherever possible.

 

Patents

Patents are generally a more costly and complicated to protect IP, and often aren’t suitable for small businesses. However if you have developed a new product or process, the issue of patenting should be considered as an integral part of your overall business strategy.

It is highly recommended that you use a qualified patent attorney if you want to lodge a patent application as many people get caught out by their lack of knowledge and experience, and many patent applications filed without the help of a lawyer are not successful.

If you aren’t sure of the value of your IP you can file a provisional application, which is relatively inexpensive and gives you 12 months to consider the commercial worth of your invention and resolve issues such as finance and licensing. You will then be in a better position to decide if further effort in pursuing patent protection is worthwhile.

Similarly, you can file an international application, which allows you to defer the costs of obtaining patents overseas, while you decide which foreign markets should be protected.

Did you know a Patent can protect and new and useful:

  • Process
  • Machine
  • Method of manufacture
  • Composition of matter
  • Improvements on existing thing
  • Software
  • Methods of doing business

 

Trademarks

Trademarks are a great, inexpensive way to protect names, logos and symbols. However not all trademarks are registrable, and you need to make sure that your idea has not already been trademarked.

So your first step is to do a search of the trade marks database and other goods and services existing in the market place to ensure that you will not be infringing any existing trade marks. Go to www.ipaustralia.gov.au to do this.

Business, company names and domain names are the most protected when they are registered as trade marks. But understand that trademarks are registered under the classes of goods and services that they will be used in, so if you have a registered trademark in a “chemicals” class #1, that trademark is not protected in other classes. When you apply for your trademark, you need to decide which classes in which you wish to protect your trademark.

Matt and Liz’s Hot Trademark Tip

If you don’t want to formally register your trademark (which costs money and time) you can use the Trade Mark ™ symbol. In fact anyone can use the ™ symbol as this does not indicate that the trade mark is registered. You can only use the ® (Registered symbol) next to your trade mark once your trade mark is formally registered.

 

Register your trademarks yourself

We have registered a number of trademarks across the various businesses we have owned and it is not a difficult thing to do yourself. We registered our first trademark using a trademark lawyer, and from this experience we were able to see how the registration process worked. (there are a few tricks – see addendum) We then just simply registered all our trademark ourselves from then on, saving a lot of money.

Beware of IP Scams!

Once you start the registration process you may get approached by “bogus” IP services (eg based in Nigeria or Channel Islands). With every trademark we applied for we got letters from these bogus IP services asking for money to register the trademarks overseas or to “renew” our trademarks – watch out for them and make sure you (or your accounts person) don’t get caught!

 

Copyright

What is copyright?

“It protects the original expression of ideas, not the ideas themselves. It is free and automatically safeguards your original works of art and literature, music, films, sound recording, broadcasts and computer programs from copying and certain other uses.

Material is protected from the time it is first written down, painted or drawn, filmed or taped. Copyright material will also enjoy protection under the laws of other countries who are signatories to the international treaties, of which Australia is a member.

Copyright protection is provided under the Copyright Act 1968 and gives exclusive rights to license others in regard to copying the work, performing it in public, broadcasting it, publishing it and making an adaptation of the work. Rights vary according to the nature of the work.

Copyright doesn’t protect you against independent creation of a similar work. Legal actions against infringement are complicated by the fact that a number of different copyrights may exist in some works – particularly films, broadcasts and multimedia products.” Quoted from the IPaustralia website.

Using the Copyright Notice or Symbol

Although a copyright notice with the owner’s name and date is not necessary in Australia, it can help prove your ownership of the copyright, and is necessary to establish copyright in a few overseas countries. Just add © Copyright 2010 – Your Name to the media you wish to protect.

 

Intellectual Property documents and information that a buyer may want to see:

  • A schedule of domestic and foreign patents and patent applications.
  • A schedule of trademark and trade names.
  • A schedule of copyrights.
  • A description of important technical know-how.
  • A description of methods used to protect trade secrets and know-how.
  • Any “work for hire” agreements.
  • A schedule and copies of all consulting agreements, agreements regarding inventions, and licenses or assignments of intellectual property to or from the Company.
  • A schedule and summary of any claims or threatened claims by or against the Company regarding intellectual property.
  • A description of key personnel who have access to valuable IP and the agreements they are on to protect you
  • A description of any IP
  • Copies (or summaries) of key employment agreements and copies of any nondisclosure, nonsolicitation or noncompetition agreements between the Company and any of its employees

 

Your tasks this week:

  1. Ask yourself – Does your business maintain an inventory of your intellectual property assets? Do you know which kind of protection is available for such assets? Remember that good protection leads to increased business value.
  2. Identify all the IP in your business and catalogue it – list it out. This will be important to show buyers at some point. For example you might list: “relationship with customers” = IP because it they are so good, taken years to build up, no one else has this relationship etc
  3. Take steps to protecting it wherever possible.
  4. Brainstorm possible new ways of doing things things that may become your IP. Set about protecting it.

 

Next week

We’ll look at renovating your PROPERTY – not just physical property but also your WEBSITES and ONLINE PROPERTY.

If you have any questions please email us at [email protected]

All the best,

 

MATT AND LIZ