Intellectual Property is increasingly being recognised as a valuable asset of many businesses. Ivan Waide, IP & Technology Partner at A&L Goodbody, give some practical tips on commercialising IP.
IP rights are typically very valuable assets that can distinguish a business from its competition, making its products and services unique and attractive to customers. There are many different types of IP, including registrable rights (such as trademarks, patents and designs) and unregistered rights (such as copyright, unregistered trademarks and know-how). For example, if a business develops proprietary software, copyright will arise in the software code automatically. A business is also likely to accrue unregistered trademark rights in product names used in the course of trade.
Identifying and Protecting your IP
Many businesses find it helpful having an IP strategy, focused on identifying the IP being developed and used in their business, and understanding its value and any fetters on its ownership. Once identified, businesses should consider how to protect this IP, including raising awareness amongst staff and where appropriate ensuring confidentiality, seeking to register it, and where necessary taking enforcement action against infringers. Once a business has identified its IP and is taking active steps to protect it, it is in a much better position to maximise its value through commercialisation.
IP can be commercialised in a number of ways, including for example the licensing of the IP to a third party or related entity on a royalty-bearing basis, assigning ownership of the IP to another entity for a lump sum (possibly with licence-back arrangements), or using the IP as a valuable asset to secure financing.
Licensing your IP
Licensing is one way of generating revenue streams whilst retaining ownership. Under an licensing agreement, the owner/licensor of the IP grants permissions to a third party licensee to use and exploit the IP on agreed terms and conditions, typically including the scope of rights licensed, the proposed “field of use” for exploitation, any exclusivity or geographical restrictions applying, as well as other key provisions such as the financial terms and termination rights.
Any business considering licensing-out its IP should therefore consider carefully the commercial terms of any such licence. For example, a non-exclusive licence will allow the licensor to grant multiple licences of the same IP to different licensees, whilst an exclusive licence would preclude the licensor granting the same rights to any third party (or indeed exploiting those rights itself) during the term of the exclusive licence. If for commercial reasons or otherwise a licensor does decide to grant an exclusive licence over some of its IP, then there are other levers it can employ to maximise value, for example by limiting exclusivity to a particular geographical territory and/or field of use, thus retaining the ability to commercialise the same IP in other territories and/or other fields of use with other licensees.
In any event a licensor should retain sufficient control over its IP by ensuring robust obligations are placed on the licensee, including provisions allowing the licensor to monitor the licensee’s use of the IP and appropriate termination rights.
The UK Patent Box
It is also important for IP owners to be aware of tax incentives available for the development and commercialisation of IP. Indeed, the UK Government recently introduced the Patent Box, a preferential corporation tax regime for profits arising from qualifying revenue derived from patents. The Patent Box seeks to make the UK a more attractive location to hold and commercialise patented technology. The UK Patent Box is proving to be of significant interest to both local IP-rich companies as well as businesses looking to move their operations to Northern Ireland.
Although there are some potential pitfalls arising in the context of commercialising intellectual property assets, there are also significant opportunities. Any business looking to commercialise its IP assets should have a clear understanding of what its IP portfolio comprises, be prepared to protect it and enforce its rights against infringers, and ensure any commercialisation deal contains the appropriate contractual protections.