Increasing the value of your business with intellectual property

Trademarks, patents and copyrights help protect your ability to profit from your own branding, physical inventions, ideas and creative work. Essentially, what you end up with is an exclusive, and protected, advantage in the market place.

When it comes to understanding what makes a business valuable, its important to look at it from the perspective of a potential buyer/investor. The investor is going to look at your business as a profit stream, first and foremost. If that’s not there, the rest won’t matter. That being said, they’ll want things that can be measured, predicted, calculated. Intellectual property is one of those things.

Of course, there is no definitive, objective value you can place on any intellectual property. But there is definitely a minimum value you can put on it, and all IP can increase the value of your business. Say, for example, you have a patent on a certain product, or a piece of equipment that helps you make a product at an unbeatable price. All of the sales of those units can directly attributed to the IP that your business controls. The icing on the cake? That revenue is secure. Or, at least, as secure as it gets. The point is, your advantage is hard to beat. So there’s very little risk that the revenue the investor hopes to take over is going away. And if there’s on thing investors love to minimize, its risk.

The basic types of IP

Trademarks help to protect your right to use a logo, slogan or other recognizable representation of your brand. In short, trademarks protect your branding. The reason they exist is because your branding communicates an expectation of things like quality and accountability. These things are marketable inthe sense that there is a price tag attached to quality. You worked to build your reputation. If somebody else uses branding that the public associates with your company, they’re piggy backing. Even worse, they could ruin your well-deserved reputation, and thus your livelihood.

Patents cover physical inventions. The basic explanation for their existence goes like this: the problem with inventing something is that, once you put all the time and resources into research and development, anybody can replicate your idea and sell it. So there’s no reason to invent something, since there’s no upside to it over just pirating other people’s ideas. Especially when somebody who is already geared up for mass production can beat you to the market and kill any chance of you feeding yourself with your own invention.

To address this problem, the government will give you exclusive rights to use and/or sell your invention, for a term. This is meant to incentivize inventors. The term is limited, to allow for future competition and improvement to designs. Patents are all in the name of innovation. The drawback to them is that they take time, knowledge and money to file for. Ironically, this can actually give somebody who didn’t invent something an advantage in the race to patent it.

Copyrights are meant to protect anything that falls under the umbrella of “creative works”. This includes literary works (like books, poems, essays, etc), visual work like paintings and photographs, and recordings such as audio books and music. Copyright is probably the most nuanced and difficult to interpret of all IP. That your manuscript should be yours is pretty straightforward…but, what exactly being “yours” means is tricky.

The basic explanation is that you own the rights to copy a work, and thus to profit from your work. Take somebody else’s book, for example: you can buy it, read it, and give it to anybody you please.

That physical copy is your property, and you can even sell it if you want. But if its copyrighted, you can’t copy it, especially to make profit from it. The copyright is not there to protect the holder’s right to profit from any given copy of the work, per se. Its there to protect their right to profit from making copies of the work. According to the copyrights, they can and should profit from every copy made.

The other confusing aspect of copyrights is the type of IP that can be protected by copyrights. A dance routine, for instance, can theoretically be copyrighted. What constitutes a copy of said routine, then? Can another performer make money on a live show? What about a YouTube video? And does the same apply to a company’s internal process? Or should that be a patent?

The drawbacks to IP

The most obvious challenge to IP is that its complicated. Without understanding IP laws, and how to go through the process of registering your IP, you’ll be lucky to get your work protected at all. That’s why there’s lawyers who make a career off specializing in IP. But the upside is there can be profit in getting your IP protected. If you find an expert you’re comfortable with, they can advise you on the best approach to managing your IP. And this brings us to the next important point: you don’t necessarily need to register your IP for it to be worth money.

The alternative is to just protect your IP yourself. This would put it in the category of a trade secret. A popular restaurant’s best recipe is an example of this. If you can keep it a secret, why bother registering it? If you patent something, it becomes public information.

The point is, there are times when your IP does need protecting, and times when its not worth the investment of your time and resources. Again, if you’re not an expert, then an expert can advise you on your options. If you do end up following through with filing, you’ll need the help of a lawyer any ways. If you’re in a business where you have a lot of IP that needs protecting or could be profitable, it makes sense to find a IP expert you’re comfortable with and build an ongoing relationship.

How IP is worth money

The most obvious way that IP is worth money in the short term is that it gives you a competitive advantage: you can offer a product that nobody else can. Maybe you can offer a product at a price that nobody else can. This advantage will be significant in the eyes of somebody interested in buying your business.

Additionally, IP can also be licensed for revenue. That means you decide who can use it, and have some say over the terms of use. For example, you could allow an affiliate to use your branding. The terms could include certain terms of use and quality standards to protect your reputation. Or, you could license your internal processes guide. You could limit the number of copies somebody is allowed to make, and what they’re allowed to do with them.

Supplementary revenue streams like these are candy in the eyes of an investor looking to acquire your business. Licensing is similar to subscription based selling in this sense; you can have long term contracts that all but guarantee revenue. When quantifying the value of your business, both you and potential buyers win with reliable, predictable income.

IP is an asset that can be leveraged in highly strategic and creative ways. So what kind of IP does your business have that could be protected and profited from?

Examples of IP that could be worth money

—Branding: logos, slogans, catchphrases, and anything else that can be considered original and representative of your company

—Internal processes

—Any equipment or software that’s been invented/developed internally

—Any written or recorded work. This could include instructional videos or audio clips and written guides. It could include photos taken or a poem written by an employee under your company’s instruction.

Of course, this is not an exhaustive list. Almost anything can be considered IP; its about how effective your argument is. Like any other set of laws, the final say on IP laws is about how they’re interpreted. You need to make a compelling argument that your work is authentic and original, and rightfully yours

— and that your own ability to profit from something you’ve created is under threat if its not protected.

Delving into the world of IP is a journey in its own right, and there’s no finish line. Even after you get your IP protected, licensing is another whole world to navigate. If you’re interested in leveraging your own IP for profit or to increase the value of your business, hiring an expert will greatly reduce risk and accelerate the process.

For help from experienced business and legal professional in Bozeman, Seattle, Pittsburgh, and Palm Springs, you can contact Free Vector Advisors. Click here to fill out our contact form.

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