Member Article

The value of intellectual property

There is little doubt that we live in an information society and that increasingly business assets are in the form of ideas and intellectual creations. For example, brands will often be the most valuable asset on corporate balance sheets. Furthermore patents, which protect novel technical ideas, are often seen as an essential requirement by potential funders before they will commit to invest. These give businesses a commercial advantage in the market by providing a 20-year, and sometimes even longer, monopoly over a device, product or method. This means that a patent owner can often attract premium prices, or gain a major advantage in tender situations because only they can offer the novel benefits of the latest patent-protected advance.

Governments all around the world now recognise that innovation is the key to strong economic growth. Emerging economies are increasingly alive to the economic benefits that can be secured by recognising and valuing intellectual property (IP). China, which had been criticised in the past for not respecting IP, has changed tack and become a prolific creator and respector of IP. Indeed China topped the global ranking for new patent filings for the first time in 2012, growing by a further 15.6% last year.

By protecting new ideas their creators can generate revenue, create new jobs, and help to boost the economy as a whole. The recognition of the importance of IP to business is reflected by the year-on-year increase in the number of annual applications for registrations of trademarks, patents and designs. Recent global statistics from the World Intellectual Property Organisation show that the number of patent filings grew 9.2% in 2012 (the highest growth for around 18 years), and by 5.1% in 2013. Trade mark filings rose 6% in 2012 and by 6.4% in 2013.

This is all clear evidence that protection of IP is fast becoming a priority in the business world. That said, while practically every company has IP in some shape or form, many still do not recognise its value or act to capture and protect/monetise it. Furthermore, many businesses are still far too lax when it comes to ensuring they don’t encroach on the IP rights of other parties. Failure to tread carefully when, for example, deciding on a new brand, company or domain name can result in court action. Awareness is all. It is wise for a company to carry out a regular audit of the IP it is generating and capturing, and to have a business-wide internal IP policy to make sure that everyone within the organisation understands the issues. These steps maximise the potential for generating wealth for the company from its IP, and also minimise the risks of it being sued for infringement.

Such infringement disputes are common in the IP world. Indeed, high profile litigations over IP rights are constantly in the headlines. Perhaps one of the most well-known of recent times was the battle between the smart phone/tablet giants Apple and Samsung over design and patent rights. This battle has been fought in courts and IP offices in many different countries. Another indicator of the increasing vulnerability of businesses to legal action is the relatively new but growing phenomenon of companies known as Non Practising Entities (NPEs, also, known as ‘patent trolls’). Their sole purpose is to acquire portfolios of patents in order to make money from businesses that they accuse of infringing the patented technology, either in the form of damages or by demanding a licencing fee or royalty payment.

Another potential challenge is the trade mark dispute. Recent high profile cases have included Interflora’s battle against Marks & Spencer over the alleged infringement of its trade marks when M&S acquired Google adwords incorporating the term ‘Interflora’. In a separate dispute, dubbed the yoghurt wars, Fage, a producer of Greek yoghurt made in Greece, took on Chobani successfully over the use of the term “Greek yoghurt” for a product made in the USA. Expect to see the growing use of the term, “Greek style yoghurt” on supermarket shelves!

In this article, I have included some examples that highlight the importance of protecting IP and the potential for disputes. Obviously, these disputes are at the very upper end of the scale but no matter the size of your business it is worth taking the time to consider and protect your IP.

Gill Grassie is a partner in the IP, technology & outsourcing team at Brodies LLP. For more information, please contact Gill on 0131 656 3710 or at gill.grassie@brodies.com.

This was posted in Bdaily's Members' News section by Gill Grassie .