Intellectual Property: Why Protect It?

All businesses own and use intellectual property. Whether you sell products or provide services, your intellectual property, and its protection, is likely to be critical to your success.  Here are three reasons why.

Distinguishing your business from the competition

Intellectual property is often associated with new inventions. But, it’s more than just this. A company’s brand, the technology it uses, the data that it owns and the licences that it holds to use intellectual property owned by others, are all valuable assets that contribute towards distinguishing your business from the competition.

If a competitor starts using a brand that creates confusion and diverts customers away from your business or reverse engineers the software that you have developed that is otherwise unique in the marketplace, this could be extremely damaging to your business.

It is therefore vitally important that companies consider their intellectual property and obtain early protection for their assets to ensure that, if any such events do occur, they are in the best possible position to deal with them quickly and cost-effectively.

Growing your business

As your business grows, you may find yourself becoming increasingly reliant on your business partners (such as your suppliers, distributors and franchisees) with whom you may need to share your intellectual property.  Whilst your contracts with these business partners should provide you with some protection against the misuse or unauthorised use of your intellectual property by them during the term of the relevant contracts, that protection may fall away at the end of the life of the contract.

Registered rights (where available) will provide you with the ammunition that you may need to discourage your business partners from walking away with your intellectual property once your relationship with them comes to an end.

Preparing for sale

The state of a company’s intellectual property portfolio will be high on the list of items to investigate for any potential buyer.  This is because a serious and experienced buyer will be aware of the importance of a company’s intellectual property, and the need to protect it.  If any issues are uncovered by the potential buyer during the due diligence process, this will at best lead to a negotiation over the purchase price for the business, or at worse to the buyer walking away from the deal altogether.

Claims (actual, alleged or threatened) of intellectual property rights infringement made against the target business or company by a third party are likely to cause a potential buyer the most concern.  Steps can be taken to minimise the risk of this happening before the relevant brand is adopted or invention put into use.  However, if appropriate searches were not carried out at the outset, it is still never too late to carry out a professional IP audit in relation to your business.  This may uncover issues, but it will at least give you the opportunity and time to deal with them before putting your business up for sale.

Eesheta Shah
Nabarro LLP

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