Broadly defined, intellectual assets are any valuable things that your company owns and that are identifiable but not physical in nature. The value of intellectual assets is often underestimated, but you should be careful not to. Study after study has shown that intellectual assets usually account for ~70% to 80% of a company’s value. When a company is sold, the physical and identified assets (those shown on a balance sheet) are usually only 20% of the companies value. For start-ups where the idea is everything and there are no physical assets intellectual assets can actually account for the total value of the business.
Intellectual Assets can be bought and sold like any other property and so they should be managed, protected and built like more physical assets
Intellectual Assets take many forms and can be conveniently divided into two categories: registered and unregistered.
Registered assets
Registered assets are the best known intellectual assets. They are often called Intellectual Property (IP). By definition they only come into force when they are registered with a government agency. There are three types of registered IP:
- Patents: One of the strongest forms of IP, patents protect a new idea, a new thing or a new way of doing something. A patent can protect your monopoly for up to 20 years by stopping others doing the same as you. It is such a strong form of protection because it doesn’t matter if the other party knew about you or not, if they are copying your invention and you filed yours first they are infringing you and you can take action to stop them. To get a patent granted you have to show that your idea is novel, inventive and enabling (commercially applicable). Patent protection is granted on a country by country basis and so it can get very expensive (usually in excess of £100K) if you want wide geographic coverage. Another disadvantage of patents is the cost of defending your rights should someone infringe you.
- Registered Trade marks: Registered trademarks protect brands. They stop someone else from “passing off” (i.e. pretending to be you to sell their goods in your market place). A trademark can be a name, a logo, a 3D shape, a colour (or set of colours) or a sound. As long as it is distinctive and recognised by your customers as coming from your company you should be able to get a trademark to protect you. Once you have a trademark you can use the ® mark to tell everyone that you have a trademark and not to copy you.
- Registered Designs: A registered design protects the shape of a 2D or 3D object. It is often considered a weaker form of protection than patents or Registered Trademarks as the UK patent office does not perform a thorough search to check whether your design is new and because it is often relatively easy for a competitor to change your design slightly to get around your protection. Having said that, Registered Designs can be of value in particular to protect avatars, symbols and icon arrangements. They are relatively quick and inexpensive to obtain.
Unregistered assets
Although unregistered you should not underestimate the value, power and legal force of various unregistered assets. The entire music, movie and entertainment industry is built on Copyright law and the recipes for some of the world’s favourite drinks are held as trade secrets. There are many forms of unregistered intellectual assets including:
- Copyright: One of the most common forms of intellectual asset, Copyright protects the expression of an idea. As soon as you write down or record an idea you automatically have copyright protection of it. Just because Copyright is automatic, it doesn’t mean it lacks value or is hard to enforce. The entire entertainment industry (music, movies, book publishing) rests on Copyright law and it’s enforcement. To enforce your copyright rights you have to i) indicate that you assert your rights – this is usually done using the © symbol, ii) prove that the person actually copied you. Copyright is a strong form of protection for software, where patents are often unobtainable or ineffective. Databases / customer lists are also commonly protected under Copyright.
- Unregistered Designs: In a similar way to copyright, any designs you produce automatically have unregistered design rights associated with them
- Unregistered Trade mark: Even if you have not registered a trademark for your business if you have become known by a certain trading style you still have some protection in the form of an unregistered trademark. To assert this protection you normally use the ™ symbol. This form of protection is not as strong as a Registered Trademark as you have to prove that the trademark is indeed recognised by your customers and that you have suffered actual loss by someone using your name – this is not required with a Registered Trademark.
- Reputation: Linked to and in some ways part of your unregistered trademark these assets include items like good publicity, customer lists, on-going contracts (supplier and customer – first mover advantage), market knowledge, product acceptance and any quality marks that you have. They are often very valuable and in some industries no sales will result without this form of intellectual asset
- Domain Names: Again, linked to trading name – a good domain name can drive customers to you door and boost your reputation and acceptance in a marketplace
- Knowhow and Trade secrets: Often the best way to protect your position is to keep a process, recipe, formula or piece of code secret. This is only really effective when it is so hard to reverse engineer or copy that it would not be economical for a competitor to do so. One of the common criticisms of a patent if that you have to declare how you implement the invention, keeping your idea as a trade secret obviously overcomes this. The drawback with trade secrets is that someone may work out what you did and then apart from first mover advantages (which may be significant) you have no protection
- Negative Knowhow: Knowing what doesn’t work is also valuable. Anyone trying to enter your market are likely to make mistakes that you have already made. Knowing what doesn’t work prevents you from spending money exploring unprofitable avenues and gives you an advantage over others in the sector
One of the best tools I have come across to help you identify your intellectual is provided by a company called Inngot. If you wish to use their tool, please drop me a line.