For most Small to Medium Enterprises (SMEs) starting out, intellectual property (IP) can be a difficult concept to grasp— particularly in terms of where it sits within the wider business and the potential value it creates. From patents and copyrights to licensing and contracts, IP and intangible assets are becoming a growing percentage of corporate balance sheets as they become more and more integrated into a business environment driven by digital innovation.
The economic advantage of an enterprise depends on how it’s creating value out of its IP. For example, in Europe, SMEs account for approximately 99% of operating businesses, employing two out of every three people and producing 57% of the European Union’s GDP. However, according to a report issued by the European Patent Office and the European Union Intellectual Property Office, a large proportion of the value generated by SMEs comes from a small number of high-growth firms (HGF), which are often quite innovative.
These innovative businesses rely heavily on IP rights. The report outlines that SMEs that have filed at least one IP right are 21% more likely to experience a growth period afterwards and are 10% more likely to become an HGF than those without IP rights applications. The direct correlation between those who protect their IP and their potential future high growth is the proof point of professional IP valuation advisory services. Once a business can identify where its value sits in terms of intangible assets, it can adequately protect, restore and monetize those assets to maximize enterprise value.
No matter which way you look at it, IP is the cornerstone of every successful growth strategy and will ultimately govern the success of a business in the long term. It’s important to engage with a professional advisory service firm and create an IP strategy that can both protect and exploit the IP portfolio as and when necessary. It’s important to apply for IP protection strategically to establish the greatest possible monopoly for your business and successfully bring it to scale.
Top tips to avoid some common IP pitfalls include:
- Don’t file a patent too early: Filing a patent essentially publishes the recipe of how the product or service can be created, leaving you vulnerable to competitors if you are not ready to go to market.
- Keep records of the IP you own: This will prove useful for valuing your business, particularly when looking for capital investment.
- Ensure third-party consultants transfer the IP they create to avoid co-ownership of any IP created. If co-ownership is necessary, make sure that the ground rules are established and agreed ahead of time.
- Keep the trade secrets secret: Staff are the biggest weakness when it comes to potential trade secret leaks. Use a confidentiality agreement, mark material as confidential and use appropriate internal procedures to ensure protection.
At Duff & Phelps, we have industry leading expertise in the valuation of intangibles and IP, serving businesses across the spectrum throughout the IP lifecycle.
For more information, contact Niall Cribben.
*The insights from this article came from the inaugural Duff & Phelps Intellectual Property Breakfast Seminar, recently held at the Duff & Phelps Dublin office. A panel of experts offered diverse perspectives on the value of IP and its importance in driving business objectives. Other panel members included: Joe Doyle, Intellectual Property Manager at Enterprise Ireland; Claire Penny, Commercial Director at Wia and formerly of IBM; Niall Quinn, former international footballer and current CEO of Fanzfirst; and James Palmer, Managing Director in Duff & Phelps London office. The panel was chaired by IP strategist Raymond Hegarty, who currently serves as Chief IP Officer with Everseen.
