Make your marque
1 Feb 10
Richard Goslan finds that intellectual assets can take many forms, but they should never be ignored
by Richard Goslan
In any business deal, a little due diligence can go a long way – especially when it comes to being sure about what intellectual property (IP) rights are included in the transaction. Just ask anyone at Volkswagen unfortunate enough to have been involved in the purchase of Rolls-Royce and Bentley back in 1998.
The German car giant spent £430m buying everything physically necessary to build a Rolls-Royce, including its plant at Crewe, but overlooked the fact that the trademark for the luxury brand belonged to the company’s aircraft engine manufacturer, not to the car maker.
Ultimately, VW lost out on owning the all-important Rolls-Royce trademark to its domestic rival, BMW. It was a colossal and expensive oversight.
But if failing to check on what intellectual assets are included in an acquisition is costly, neglecting to protect your own IP could also come back to haunt you. With budgets under pressure, companies could be exposing themselves to unnecessary business risks.
“The downside of smashing the IP budget is that you end up with no protection,” says David Moreland, managing partner in the Glasgow office of patent and trademark attorneys Marks & Clerk.
“Financial directors might be tempted to reduce the IP budget quicker than the budget for regulation, because if a product isn’t certified then you can’t get it out there.
“It’s a quick fix, but not necessarily an economic one, because it can lead to a long-term loss if you don’t protect the unique selling point of your products or services. If someone else takes it away, you won’t have any recourse against them. IP rights are there to try to ensure that companies and innovators can benefit from the work they’ve put in.”
When it comes to protecting intellectual property rights, you are never too big – or too small – to trip up.
“A common mistake which we see with small businesses, which are operating within a limited area, is assuming there’s no need to register their trademark either nationally or internationally,” says Graham Murnane, director with trademark and patent attorneys Murgitroyd and Company.
“People often don’t think about registration until it’s too late, when a dispute has already arisen. You need so sit down and carry out a due diligence exercise, to look at what’s important to your company. Ask yourself the question: if you didn’t own it, would it be a problem?”
And at a time of economic volatility, with a marked rise in insolvency, having your IP audited and valued is more important than ever.
“There are a lot of companies who don’t seem to know how to value their IP properly,” says Jackie Maguire, chief executive officer at Coller IP Management, a specialist in commercial IP management and evaluation.
“So when it comes to a merger or acquisition, they don’t have their ducks in a row for investors to know what the IP value of the company is. But valuing IP is more than just the numbers. It is important to understand the quality of what’s there.”
Iain Russell is chief executive of the Intellectual Assets Centre, which works with mostly small and medium-sized businesses in Scotland to raise awareness of intellectual assets and to understand their quality.
“We give advice and information on what businesses can do to protect, safeguard and, where possible, to exploit their intangible value, even if the world seems against them in some respects.”
He says accountants and financial directors have a responsibility to protect, safeguard and exploit IP, because positioning your company as a unique value proposition gives it a higher value as a business.
“FDs usually have an appreciation of the pros and cons of putting intellectual assets on their balance sheets,” he says. “But they often shy away from these sort of issues, because in the past they’ve not needed to focus on them. In these recessionary times, when you’re desperate to shore up your balance sheet, there’s far more interest.”
The cost of protecting IP is often cited as a barrier, but industry experts dismiss those fears.
“Cost is in the nature of IP,” says Paul Carlyle, a partner specialising in media and technology law at Shepherd and Wedderburn.
“Certain rights are free because they attach automatically, so if you write something down it’s protected by copyright. Trademarks are also dirt cheap – you’re looking at a couple of thousand pounds to get decent trademark protection in place, which is renewable indefinitely, registered right across the European Union.
“Patents are more difficult – they are quite expensive and continue to be so. A UK-only patent is relatively cheap, but the problem is you would never just get such a patent, because the concept of protecting your product in one market is pointless.”
Iain Russell points out the measures anyone can take to protect their IP without incurring huge costs.
“You can make a submission to the Intellectual Property Office in the UK for £100, and they can tell you within two or three weeks whether it’s likely to be registered as a trademark. If it is likely, you can pay them a further £100.
“Of course, legal advice can be expensive, but it can save you a hell of a lot of grief down the line.”
If you have gone to the trouble and expense of protecting your intellectual property, you should also be careful not to neglect it.
“IP rights require active maintenance,” says Carina Healy, partner in IP for Dundas and Wilson.
“For trademarks, patents and registered design rights that require active renewal, forgetting to renew them can be a costly mistake. But failure to monitor and enforce your rights against infringers can be equally costly. Brands can be diluted and the value in other assets reduced.”