Article

Protecting Intellectual Property

Michael Barnett Michael Barnett

Growing, dynamic businesses will successfully differentiate themselves from their competitors in order to achieve better margins, increase market share or attract investment. They will seek to gain an ‘edge’ or a USP (‘Unique Selling Point’) over their rivals through better product design, specialist know-how, or through investment in their brand.

It is no surprise to learn that the most successful companies are those that successfully manage and exploit their USP and in particular their Intellectual Property (IP).

Intellectual Property can be considered to be the non-physical assets (that may or may not appear on a balance sheet) which are fundamental to the value and the success of a business. Intellectual Property itself is not limited to the large or specialist corporates and many businesses in Northern Ireland may be surprised to learn that they are likely to have some intellectual property of their own.

What is perhaps more surprising is that the majority of businesses take little or no action to protect the IP that they rely on for their success. Often the true value of IP is not fully appreciated until it is lost.

Before IP can be protected however, a company must first understand the IP that it owns. Specialist IP audits have been developed to address that need and will provide an understanding of key IP assets, their impact on the business and the market advantage the IP provides.

The nature of IP protection will depend upon the nature of the IP itself, but generally the remedy falls under one of five common forms:

  • patents are probably best known and are designed to protect new inventions. Obtaining a patent can be a complex process but can offer protection to the business for up to 20 years;
  • trade marks protect brands and can be made up of words, logos or even be sound or action based. The Nike ‘swoosh’ and the Intel ‘jingle’;
  • design rights will protect the overall visual appearance of a product;
  • copyright protects literature, art, music, websites, photographs, software, databases, films and print etc; and
  • trade secrets can be an important part of your business and are protected under the law of confidentiality. Special consideration should be given when sharing such information with parties (including funders and advisors) and Non-Disclosure Agreements should be used in those circumstances.

It is equally important for a business to ensure that it is not infringing on another entity’s IP. The costs associated with infringement can be significant, and the receipt of a ‘Cease and Desist’ letter for an IP infringement can lead to operational difficulties for companies. Prior to the launch of a product or business it is therefore recommended that the necessary IP searches are performed.

Finally, understanding a business’s IP may also open up a number of potential tax incentives to companies. Research & Development tax credits are now generally well understood but the potential for an effective tax rate of 10% on qualifying income under the ‘Patent box’ rules is less well known and perhaps underutilized in Northern Ireland, but a very attractive prospect for those that qualify.