CENSIS white paper: Intellectual Property in Business

Intellectual Property in Business: IP basics, IP management, IP strategy
IP Basics for Start-ups
1 The role of IP in a business
The term ‘intellectual property’ (IP) refers, in a broad
sense, to intangible creations of the human intellect.
A collection of codified laws, called IP rights, provides
rules that govern rights in these assets and seeks to
give a fair reward for creators to incentivise innovation,
without unduly restricting competition in the
marketplace.
IP rights include:
• registered rights such as patents, registered trade
marks, and registered designs (known as design
patents in the USA), and
• unregistered rights such as copyright and
unregistered design rights.
From a legal point of view, IP rights are legal
instruments that provide some limited exclusive rights
to prevent others from exploiting the protected IP.
These rights can, in effect, create a legal space that
belongs only to the owner of the IP rights and provide
that owner with a right to block third parties from using
the protected idea without authorisation (through a
licence). 3 The effect of these IP rights is to carve out
a niche that can be accessed only with the owner’s
approval.
In the early stages of building your business, owning
IP rights can dramatically improve your negotiating
power and the perception of your business as a
credible partner. As well as providing legal protection,
they can demonstrate your R&D investment and
prowess, technological capacity, high level of expertise,
innovative approach and commercial awareness.
Presenting this positive image can strengthen your hand
when you are negotiating with investors or creditors,
raising funds and increasing your market value. When a
company takes its IP position seriously, its competitors,
partners and customers are very likely to take that IP
position – and by extension the company – seriously as
well. A study of more than 2,000 European small and
medium sized companies found that ‘value and image’
was the third most important reason for protecting IP. 4
In addition, IP can help you attract higher-quality
partners because your own IP protection can protect
your business partners as well (see the section on
Supply chain and IP).
Regardless of your personal views on IP rights, the
fact is that IP rights matter – and they matter a lot. For
example, when you pitch to investors, it will not be
long before they ask you about your IP. They will want
you to protect your technology with IP rights, among
which patents stand out most prominently. Investors
recognise value and usability in IP rights because having
IP protection for the most crucial and/or recognisable
aspects of your offering increases the value of your
business. In addition to that, IP rights offer a good basis
for scaling up a business – something most investors
will want to hear about.
Another reason why IP rights matter is that unlike
material or hard assets, they do not wear out or lose
value through use. On the contrary, they gain in value.
A business can generate a revenue stream through
licensing IP to third parties (this model applies to all
kinds of IP rights). And even if the company itself does
not perform well, good inventions protected by good
patents are always valuable and saleable – and for
investors, that matters.
3
Every agreement that covers exploitation of the technology (by manufacturing, selling, exporting, etc.) includes a list of IP rights that defines the technology
at stake. This usually appears in an annex at the end of the agreement.
4
‘5 reasons why investors love intellectual property’
(EU Startups, 8 January 2018) accessed 2 December 2022.
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