Business Planning and IP: A Practical Example

Jane Lambert

Yesterday I wrote Why every business plan should take account of intellectual property 3 Apr 2016 4-NIPC News.  I explained:

"Every business no matter how small nor how simple owns some kind of intellectual asset that is vital to its trade. It may simply be the name or reputation of its owner in the case of a retailer or a tried and trusted recipe for making sponge cake in the case of a tea shop or sandwich bar but if it attracts customers to the business it is an asset which needs protecting, managing and exploiting."

I added:

"Conversely, a business may need to use the assets of somebody else's assets. A photo on the internet perhaps for the company website or maybe some software for the computer. It needs to plan how it is to acquire the right to use or even buy that asset and how much it is prepared to spend. All of these matters are at least as important to the start-up as the lease to an office or the purchase of a delivery van."

I promised to blog about the topic and this is the first of my promised articles.

What is Intellectual Property?

Intellectual property is simply the collective name for the bundle of laws that protect investment in generating intellectual assets.  They include patents, copyrights, trade marks, registered designs and unregistered design rights as well as judge made rules that prevent one trader from supplying goods or services under a name or trading style that is the same as or similar to someone else's or the unauthorized use or disclosure of secret and sensitive technical commercial information.   Intellectual assets are the brands, designs, technologies and creative output that tend to give one business a competitive advantage over others.

Not all Intellectual Assets are Equal

Not all intellectual assets are of equal value. There are, for example, inventions that no one want such as the three legged tights in the European Patent Office's Seven Deadly Sins of an Inventor.   There is no point in spending thousands of pounds on patenting them.   Similarly, there are distressed brands and designs that are so pedestrian or so ugly that they put consumers off the products rather than attracting them.  It would be a complete waste of money to apply for trade marks or design registrations for them.

Needing a Plan

Intellectual property rights - particularly patents - are expensive to obtain, manage and enforce. Not even the biggest companies try to protect every intellectual asset they possess. Experience teaches them which intellectual assets are worth protecting and which are not.  By definition, those launching new businesses, including many inventors, will lack that experience.  They need a plan to identify the intellectual assets that require legal protection and to tailor such protection to each asset's requirements.

A  Simple Five-Point Plan

Here is a simple five-point strategy for start-ups and other small businesses.

1. Identify the main revenue streams for your business over the business planning period. List the profitable products or services that you supply or for which your receive royalties or licence fees.
2. Consider the likely threats to those income streams. In most cases these are going to be commercial. Competitors will launch new products, reduce their prices or maybe consumer buying behaviour may change. Only in a minority of cases will you have reason to fear copying of your designs or technology or adoption of similar branding.
3. Devise appropriate counter measures.  In many cases these will be commercial too even if you fear copying or passing off. In some circumstances, launching a new model, re-branding, reducing your prices or finding new markets can be as effective and often cheaper and  more certain than litigation. However, a commercial option is not always available or attractive. For those cases where it is not you may need to plan a legal response.
4. Choose the optimum legal protection.  Put yourself in the position of your customer and consider why he or she is likely to find your product attractive. Is it its appearance, the way it works or the reputation of your business? If it is the appearance of your product you should see whether you can register its design either for the UK alone or the whole EU. If its your reputation you should think about registering your business name or logo a trade mark. If it is the way the product works or is made a patent may be the best option. If it cannot easily be reverse engineered you could keep it under wraps as a trade secret. Maybe unregistered design right will be enough. Factors to take into account will include the shelf life of your product, the size and value of the market, whether you want to sell it abroad and all sorts of other matters.
5. Make sure you can enforce your legal protection.  Although bootlegging, counterfeiting and piracy are crimes as well as torts primary responsibility for enforcing your intellectual property rights rests with you. That means bringing infringement proceedings in the civil courts. In England and Wales the costs of a High Court action can exceed £1 million. In simpler cases that can be brought in the Intellectual Property Enterprise Court recoverable costs are capped at £50,000 for determining liability and £25,000 for assessing damages or other profits to be disgorged. There is a small claims track where costs are limited at a few hundred pounds for certain types of IP claims under £10,000. If you cannot afford such costs out of revenues then you should consider intellectual property insurance or other kinds of funding.

All of those matters, particularly funding, should be in your business plan. If you want to discuss this article or intellectual property strategy generally, call me on 020 7404 5252 or contact me through this form.