New companies are hotbeds of innovation but their products, technologies and designs are vulnerable to copying or theft by larger rivals. It makes sense, therefore, for them to protect their intellectual property (IP) and a recent study reveals that those who do, benefit from stronger growth.
European SMEs owning at least one piece of IP are 21% more likely to experience a growth spurt and 10% more likely to become high-growth firms, according to a survey by the European Patent Office and the European Intellectual Property Office1. But worryingly, the study shows that only 9% of these companies own their own registered IP rights, compared to 40% of larger companies.
So, what options are available to start-ups and SMEs and what’s the best way to secure protection for IP, which broadly consists of brands, designs, technical innovations, software, industrial processes and creative works including films, videos, books and music?
The best-known types of protection are copyrights, design rights, patents, trademarks that generally require registration, while creative work and software typically get automatic copyright protection.
“IP is poorly understood,“ says Dr Anthony Thomson, growth planning and IP specialist with Elephant’s Child. “It’s not just about registered IP, there are also trade secrets and know-how. These include technical processes, design, commercial methods, formulae, practices or information that – crucially – isn’t generally known about by others. They’re an alternative defence that’s cheaper to obtain without any registration.”
Creating a trade secret involves process, instructing staff not to share confidential information with people outside the company, building this into employment contracts and including non-disclosure agreements if necessary. Hold regular meetings to ascertain new developments in your business that might need to be protected as trade secrets or other IP.
Going down the patent and trademark route requires your IP to be registered with relevant bodies and protected in each geographic region you’re targeting. Registering patents in particular involves lengthy, legal processes, specialist advice and potentially high costs.
“IP protection confers competitive advantage, allowing companies to commercially exploit their inventiveness, so it pays to build a costed IP strategy into your business plan right from the start,” Anthony explains.
“But be selective and considered in what you protect so you don’t overspend, and ensure any IP is owned by the business, not an individual. Seeking legal expertise to conduct a freedom to operate (FTO) study to ensure your IP doesn’t infringe on prior art, is a key first step.”
He recommends getting advice from reputable business advisers and legal firms with dedicated IP specialists and access to chartered patent and trademark attorneys. Once protected, it’s worth considering licensing your IP to other companies to manufacture and sell. “Licensing offers high margin revenue streams and is attractive because it is scalable and you can license to multiple organisations, globally,” he adds.
Having protected IP acts as a strong deterrent but when someone infringes your IP, action must be taken, either through the courts or by using specialist companies.
Four years ago, entrepreneur Rachel Jones launched SnapDragon, experts in identifying IP infringers and copyists and getting their websites, and any links to fake products, taken off the internet to stop them being sold, exported, imported and distributed.
She formed SnapDragon in 2015 after fighting a long battle to prevent counterfeits of her children’s high chair, Totseat, reaching the markets.
She says: “As an absolute minimum, with a product, you need a trademark. It’s the least expensive registered IP and a very useful, cost-effective tool to successfully fight counterfeits. Most companies don’t have the skills to scour the web for infringements, which is where we come in.
“I believe registering and defending your IP makes your business more likely to grow because it tells the world you’ve got something worth coveting.”
1 IPR intensive industries and economic performance in the European Union. Third edition. Published by the European Patent Office, September 2019.
This article is written for the St James’ Place Entrepreneurs Club newsletter. The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.