Parliamentary launch of ‘The UK’s Journey’ in WIPO’s Understanding IP Finance series with Martin Brassell Inngot

Parliamentary launch of ‘The UK’s Journey’ in WIPO’s Understanding IP Finance series

Text of address by Martin Brassell, report editor, at the Parliamentary launch of ‘The UK’s Journey’ in WIPO’s Understanding IP Finance series

Firstly, many thanks to Viscount Camrose for hosting this event, and to Director-General Daren Tang and his team at WIPO for commissioning this report and joining us today.

Before I delve into the report, perhaps I should answer a more basic question. What do we mean by IP finance – and why should we (or more importantly, you) care about it?

At its core – IP finance simply means using intellectual property rights (like patents, copyright and trade marks) as a way to unlock funding.

As others have said, these are the assets that drive contemporary business value. So IP finance is about giving proper consideration to these non-physical assets, to better direct the flow of capital.

10 years ago, I co-authored the IPO’s ‘Banking on IP’ report. Then, as now, there was a focus on unlocking the growth potential of the UK’s small and medium enterprises (SMEs).

We noted then that the value of IP is often hidden – accounting rules mean many IP-rich firms appear to have weak balance sheets (and look exceptionally good at spending money).

Attitudinally, we found that equity investors generally ‘get’ the importance of IP – though it is just one of a number of things they consider. Whereas lenders have been brought up to draw a red line through any intangibles on the balance sheet – or even view them as a liability.

We characterised the lending problem as being two fundamental challenges. These are: high transaction costs – from getting to grips with the IP and structuring affordable loans (especially since intangibles do not attract capital relief under standard approaches) – and a lack of confidence in the recoverable value of IP assets.

A key reflection, as DG Tang has said, was that we need to promote better understanding of IP as an asset class rather than a purely legal construct.

As a form of personal property, IP can be bought, sold and used as security for a loan, much like any other asset.

Most of the assets lenders generally deal in are physical commodities. There are many different buyers for these; their price is fairly easy to establish; and they tend to be visible on the balance sheet.

IP does have a number of things in common with these other assets. It requires maintenance; it can be damaged; it doesn’t last for ever.

But it also has some important differences. IP is usually business-integral – and business-critical.

It is infinitely scalable, yet can still be scarce. Also, its value is context sensitive; it will appreciate if well managed, although (at the risk of sounding like an investment disclaimer), it can go down as well as up.

These are differences, not disadvantages. The whole point of IP is that it is not a commodity.

Parliamentary launch of ‘The UK’s Journey’ in WIPO’s Understanding IP Finance series 2

 

So, where have we come over the last ten years?

  1. We’ve realised that IP finance is not all about patents. They’re a great source of data, but every international scheme I know of that’s started with patents has subsequently been broadened out to include other forms of IP.
  2. We’ve also realised when it comes to debt, IP finance isn’t about start-ups. Start-ups carry equity levels of risk. They need money to build the IP that can then be used as security. But as a business grows, it can reduce its dependence on dilutive equity for growth capital and borrow instead.
  3. We know just how important it is to get this right. We didn’t have a Scaleup Institute in 2013, but we now know from its research that these scale-ups that account for just 0.5% of SMEs, also account for 58% of all SME turnover.
  4. We have clear evidence that IP is associated with better borrower behaviour. Research by the BBB and IPO in 2018 showed 40% lower propensity to default and 50% lower loss given default when registered IP is present. That doesn’t prove IP is a panacea – but let’s not pretend it is a coincidence either…
  5. We now have better data and tools to find, analyse and understand IP.
  6. We see that in insolvency, when the worst happens, IP often sells fastest and best.
  7. We have clearer and more comprehensive valuation standards, recently updated, thanks to the International Valuation Standards Council.
  8. And we have new insurance products that can address IP risk for banks as well as borrowers.

 

Most importantly, and as a result of all these developments, we have lenders who are now prepared to ‘learn it by doing it’: such as HSBC UK, and NatWest (and we’ll hear from Neil Bellamy of NatWest in a moment).

This shift – which, let’s not forget, has been led by industry – is significant. There is still a long road ahead, and turning IP-backed lending into a mainstream offer for high growth firms won’t happen overnight. However, the importance of IP advocacy across the accounting, finance and insurance landscape is clear.

So if you take just one thing away from you today, let it be this: IP finance is here, to stay.

Business team using IP to scale up

Scaling up using your intellectual property (IP)

When it comes to scaling up a business, one potentially valuable asset class that often gets overlooked is the company’s intellectual property and intangible assets (IP).

IP refers to intangible creations of the mind, such as patents, designs, trade marks, brand names, copyright, trade secrets and some other rarer knowledge assets. Leveraging your IP can be a game-changer in accelerating growth and staying ahead of the competition. In this article, we’ll explore how harnessing your intellectual property can also help you effectively scale up your business.

Establishing a strong IP strategy

Before diving into scaling up using your IP, it’s crucial to have a clear IP strategy in place. This strategy should align with your overall business objectives and focus on protecting and maximizing the value of your IP assets. Here are some key steps to consider:

Identify your IP assets

Start by identifying all the potentially valuable IP assets your business possesses. These could include patents, trademarks, copyrights, trade secrets, or other proprietary technology or processes.

Protect your IP

Once you’ve identified your IP assets, take the necessary steps to make sure you have the highest levels of protections possible. This may involve obtaining patents, registering trade marks, or implementing robust internal processes to safeguard trade secrets.

Leverage licensing opportunities

Consider licensing your IP to other businesses or individuals. This can create additional revenue streams without requiring significant investment on your part. You might allow companies in countries you don’t plan to operate in to use your IP. Or you could license your IP to companies in non-competing business sectors that could benefit from it. Or, if you have a famous brand, you could license its use for toys, games or household goods.

Explore collaborations

Look for strategic partnerships and collaborations where your IP can be mutually beneficial. This could involve joint ventures, co-branding initiatives, or technology-sharing agreements. As with licensing, you can increase revenue potential for IP you already own; but such deals may also create new IP for you and your partners.

Monitor and enforce

IP is valuable; protect it. With things like patents, trade marks and copyright, you need to be watching for any potential infringements on your IP rights. If you spot any, then you need to take appropriate action to enforce your rights and protect your IP from unauthorized use.

With trade secrets, as we’ve already said, you need to have robust systems in place to keep them secret – and to react if there are any apparent breaches of confidentiality.


Scaling up through innovation

How to protect your intellectual property with automatic rights and other forms protection strategies 

Innovation is at the heart of scaling up using your IP. By continuously improving and expanding your IP portfolio, you can drive growth and further differentiate yourself from competitors. Here’s how you can leverage your IP to fuel innovation:

Research and development

Research and development (R&D) spending should focus on enhancing existing IP assets or creating new ones. Either can lead to breakthrough products or services that attract new customers and open up new markets.

Market expansion

Use your IP as a springboard to enter new markets – which could be in other countries, or other industry sectors.  You IP, by definition, is unique – it is what gives you a competitive edge over rivals. Leverage the credibility and reputation you have built up through your IP and your­­­ brand to expand geographically or into new business sectors.

Product line extensions

Develop new products or services based on your existing IP assets. By leveraging the knowledge and expertise already embedded in your IP, you can efficiently expand your product offerings and cater to evolving customer needs.

Strategic partnerships

Collaborate with other businesses, startups, or academic institutions to explore sharing complementary IP assets. Such partnerships can turbo-boost innovation, exploit synergies, and accelerate growth for all parties involved.


Leveraging IP for marketing and branding

How to protect your intellectual property with registered IP rights

Your IP can be a powerful tool for marketing and branding, helping you build a strong and recognizable presence in the market based around product or service superiority backed up by innovation. Here’s how you can utilize your IP to enhance your marketing efforts:

Brand identity

Your trademarks, designs and logos are valuable assets that represent your brand. Incorporate them consistently across all marketing channels to reinforce brand identity and improve brand recall. If you have patented technology, make sure your customers know that and how it gives you an advantage over rivals.

Content creation

Use your IP to generate compelling and informative content that positions your brand and the key personnel behind it as industry leaders. This could include whitepapers, case studies, blog posts, or (for key individuals) thought leadership articles, speaking engagements, guest blogging, or taking part in industry conferences and events.

Social proof

We live in a social media world. Use social channels to share and amplify testimonials or success stories that showcase how your IP has delivered practical value to your customers. This social proof enhances your credibility and builds trust among potential customers.


Conclusion

Scaling up using your intellectual property is a strategic approach to accelerating growth, fostering innovation, and building a strong brand. By establishing a robust IP strategy, leveraging licensing opportunities, fuelling innovation, and exploiting your IP for marketing purposes, you can unlock the full potential of your business. Remember, effective utilisation of your IP can give you a competitive edge and help propel your business to new heights.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered legal advice. For specific legal guidance related to intellectual property, it is recommended to consult with a qualified professional or contact Inngot to discuss IP strategy, services and IP finance.

Raise business finance without personal guarantees…No, really!

Raise Business Finance Without Personal Guarantees… No, Really!

Access to finance is crucial for scale-ups looking to fuel their growth and innovation. However, traditional secured financing options often come with requirements which can include personal guarantees from business owners. In the absence of sufficient company tangible assets for security these PGs can be backed by a home so this can be a deterrent for many entrepreneurs who want to protect their personal assets.

However, with support from Inngot, NatWest is now offering a ground breaking solution – IP-backed loans for scale-ups. Growth businesses without tangible assets to offer as security but with valuable intangibles can raise finance without the need for personal guarantees, thanks to the NatWest IP product which is backed by our proprietary software that identifies, values, and assesses intellectual property (IP) assets for use as collateral.

A new era in scale-up finance

Traditionally, securing finance for scale ups has been challenging if they don’t have tangible assets to as security such as buildings, vehicles and equipment. This model is no longer suitable for 21st century businesses where the value in most companies lies in their IP and intangible assets. This means that directors either lose out on accessing vital finance to scale and grow, or take personal risks.

With IP-backed loans, scale-ups can now access the capital they need by leveraging valuable IP assets, including patents, trademarks, copyrights, and trade secrets, to secure the funding they need.

 

The power of Inngot’s software

Our software enables businesses to comprehensively identify and value their IP assets, providing detailed reports that form the IP basis for NatWest’s IP-backed loans. By leveraging advanced algorithms and data-driven analysis, our software ensures accurate valuation and assessment of IP assets, giving NatWest confidence in using companies’ IP as collateral.

 

Key benefits of IP-backed loans

The IP-backed loan package offered in partnership with NatWest brings several key benefits for scale-ups:

  1. No personal guarantees

One of the most significant advantages of IP-backed loans is that they eliminate the need for personal guarantees. Business owners can secure financing using their IP as collateral without the need to put personal assets on the line, providing peace of mind and a sense of financial security.

  1. Repayment holiday

Another valuable feature of the loan package is the ability to have a repayment holiday at the beginning of the loan term (please note this is at NatWest’s discretion and depends on the specific circumstances). This allows businesses to focus on growth and investment during the crucial early stages, without the immediate burden of monthly capital repayments.

  1. Access to capital for growth

By unlocking the value of their IP assets, scale-ups gain access to much-needed capital for various growth initiatives. Whether it’s expanding into new markets, investing further in research and development, or hiring top talent, IP-backed loans provide the necessary funds to propel businesses forward.

  1. Retaining ownership and control

Scale-ups can maintain ownership and control over their intellectual property while utilising it as collateral. This means that as the business grows and succeeds, it retains ownership in the IP, the value of which could potentially increase significantly. Of course, if the company fails to keep up repayments on its loan, it could lose control of the IP it pledged as collateral. Pure debt funding like this is non-dilutive for company owners as they are not selling more equity to raise funds – so they retain greater control.

  1. Potentially access more funds in the future for growth during the loan period

If the value of the IP which a company has used as collateral increases – and it should, if the company is investing in R&D and exploiting its IP properly – then there is the possibility that when the IP is revalued, it may unlock more finance from NatWest down the line and help to propel the business further.

 

Hallmarq collateral suitability checker

Empowering Scale-Ups for Success

The collaboration between Inngot and NatWest represents a significant milestone in scale-up finance. By offering IP-backed loans without the need for personal guarantees, we are empowering entrepreneurs and scale ups to drive innovation and growth. Our software-driven approach ensures accurate valuation and assessment of IP assets, allowing businesses to leverage this untapped potential for financing without giving up some of their future returns by selling more equity – and without putting their homes at risk!

With Inngot’s expertise in IP valuation and NatWest’s commitment to supporting growth businesses, together we are transforming the financing landscape for scale-ups. By raising business finance without personal guarantees, scale-ups now have more freedom to innovate, expand, and thrive in an increasingly competitive market.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or legal advice. It is recommended to consult with your professional advisors, as well as representatives from NatWest, before making any financial decisions.

How to protect your intellectual property with automatic rights and other forms protection strategies

How to protect your intellectual property with automatic rights and other forms protection strategies

Registered rights such as patents and trade marks are very important when it comes to protecting your IP and intangible assets; but it would be a mistake to ignore other ways to protect them, including unregistered rights such as copyright, trade secrets, as well as strategies to record valuable know-how that resides in your employees heads.

Copyright protection

In almost every country in the world, copyright is an automatic right (which means you don’t have to register it) that protects original works of authorship. An excellent example of this is the copyright held by J.K. Rowling for her “Harry Potter” series. No one else can write Harry Potter stories, make films based on the characters or sell toys and games set in the Harry Potter ‘universe’ without her permission.

However, copyright only protects the expression of an idea and not the idea itself, limiting its scope. Nonetheless, it plays a crucial role in the creative industry, protecting authors, musicians, filmmakers, and creative artists from having their work copied without permission.

One drawback to copyright is that it is the creator who gets the automatic copyright to a creation – so if your company uses freelancers to write copy, create designs, take photographs, make videos etc, you should always get a legal agreement assigning copyright to the client company for the work produced.

Securing copyright in this way is particularly important for marketing materials or advertising collateral, as it means a company can use that copyright to stop other companies from using their images, sales documents, brochures and the like – a particular problem online.

Where multiple people may have had a part in creating something, copyright ownership can become quite complex. This is often the case with music, film and TV, and can even be true of books – the original author will have copyright in that first work, but designers, illustrators and publishers can all also get copyright for their contributions to the finished product.

Possibly one of the most useful aspects of copyright is that it can protect software code; and it does not cover raw data, it can cover how databases are organised.

The UK IPO has a useful guide to copyright here.

Trade secrets

Trade secrets cover information that companies keep secret to give them an advantage over their competitors. The recipe for Coca-Cola is one of the most famous trade secrets in the world – and is now locked away in a vault in the World of Coca-Cola visitor experience in the company’s home city of Atlanta, Georgia.

Trade secrets can be short-lived (e.g. a marketing plan) or long lasting (as with the Coca Cola recipe); but they all have to adhere to certain criteria including:

  1. They can’t be known generally to the public;
  2. They have having commercial value because they are secret;
  3. They are subject to reasonable steps to keep them secret.

Protection of trade secrets can be challenging since it requires constant vigilance. Once a trade secret is exposed, it cannot be protected again. That means companies must implement strict internal procedures to ensure the confidentiality of such information.

For example, trade secrets should be:

  1. Clearly marked as confidential;
  2. Stored and catalogued securely;
  3. With access restricted to those with a “need to know”.   

The biggest risk with trade secrets concerns accidental or deliberate disclosure by employees, former employees or other confidants. This should be addressed in formal agreements, backed up by training. 

If you do ever need to discuss anything relating to your trade secrets with a third party, you must ensure that you have robust Non-Disclosure Agreements in place prior to those discussions starting.

Similarly, a company’s trade secrets policy, and how employees must adhere to it at all times, should be an integral part of employment contracts and regular training for all staff.

It would also be sensible to have strict cybersecurity protocols embedded in your company culture.

A quick guide to trade secrets

Ways to protect know-how

Often, some of the most important intangible assets a company can own are the experience and creativity of its key personnel. While such know-how has immense value, when it’s in their heads, it’s difficult to protect. They may leave the company, or they could be knocked over by a bus.

One way to protect this valuable knowledge is to get them to record it. So you should, as a matter of course, get anyone involved in research and development to keep up-to-date process notebooks and other records. As soon, as this knowledge is recorded, it can be protected by copyright law.

At the same time, if a new invention or innovation is really core to your company, then explore whether it can be patented.

Inngot offers a range of tools and services to help identify, value, and exploit your IP assets and may be able to advise on steps to protect them, although we do not draft patent or trade mark applications.

Other forms of protection

Although patents, trade marks, copyright and trade secrets are the forms of protection that most companies will find most useful, there are various other specialist rights such as Plant Varietal Rights and topographical rights for printed circuits, also called chip design rights.

Inngot offers a range of tools and services to help identify, value, and exploit your IP assets and may be able to advise on steps to protect them, although we do not draft patent or trade mark applications or advise on legal matters.

How to protect your intellectual property with registered IP rights

How to protect your intellectual property with registered IP rights

In the 21st century, for most companies, intellectual property has become one of the most valuable assets a company can own. It can be leveraged to raise finance, generate revenue, and fuel growth. But it needs to be protected – and this article will cover various forms of registered IP protection, including patents, trademarks, and registered designs.

We’ll cover unregistered rights such as copyright and trade secrets, and strategies to improve protection in other ways, in a second article.

Patents

A patent is a form of registered IP that gives its owner the exclusive right to stop others from making, using, selling, and importing an invention for a limited period of time, usually a maximum of 20 years. You can find out more about patents on the UK’s Intellectual Property Office website.

For example, Google holds a number of patents for its search algorithm, which means other companies can’t just copy it.

However, obtaining a patent is a complex process, and can be costly and time-consuming. The registration process also requires that the inventor to disclose the details of their invention to the public. So while patents offer robust protection, they might not be suitable for every business.

For example, there may be an argument for using trade secrecy laws to protect an idea – a trade secret can last a lot longer than a patent will, but only if the owner takes stringent steps to make sure it stays secret. You’ll find more on trade secrets in the UK, and how they compare with patents, in this report commissioned by the IPO.

If a company is worried a trade secret might get out, one precaution is to prepare all the paperwork for a patent application for whatever the innovation is, and submit it the moment it looks like a rival has worked out the secrets behind it.

While patents often just cover an innovation in one country, there are international agreements which may allow patents to be registered for multiple countries in one application – the most recent development in this area is the European Unitary Patent, administered by the European Patent Office. You can find out more about the Unitary Patent here.

Trade marks

Another important IP right that you have to register is trade marks. These protect brand names, logos, slogans, and other identifiers of a business. A classic example is the golden arches logo for McDonald’s, which is recognized worldwide.

You can search the UK trade mark database from the IPO website here. If you want to explore trade marks internationally, then the World Intellectual Property Office (WIPO) offers a global brand database where you can search and register trade marks to protect your brand.

Downsides for trade marks are:

  1. They are usually country or region specific, so companies may need to register multiple times if they expand outside their home market;
  2. They need to be renewed every few years;
  3. You have to apply for each class of business you want to use a trade mark in separately – so checking what classes are relevant to you is vital;
  4. You need to be able to show evidence that you are continuing to use a granted trade mark in each class and country you have registrations for;
  5. And you need to actively defend your trade marks — if not properly managed and defended, trade marks can be lost, potentially damaging a company’s brand.

The biggest upside to trade marks is they can theoretically last forever, if renewal fees are paid and if you keep using them. The first ever trade mark granted in the UK, for Bass beer, is still valid – nearly 150 years after it was first granted in 1876.

You can use the TM symbol on something without the need to register it – it functions effectively as a warning notice and an indication that you may apply to register it. But you cannot use the ® symbol until you have registered something as a trade mark – in most jurisdictions, including the UK, doing so is illegal.

Registered designs

Registered designs protect the appearance of a product. For instance, Apple has registered designs for its iPhones, protecting their distinctive look. WIPO provides an international design system, the Hague System, for the registration of industrial designs.

However, registered designs can only protect the visual features of a product, not its functionality or technical features. This means that while a registered design can prevent others from copying the look of your product, it cannot stop them from creating a product that functions in the same way.

Even so, registered designs can be very important in protecting a company’s IP and its brand. Tyre companies, for example, use registered designs to protect their trade patterns – and take legal action against rivals who copy those patterns.

How to protect your intellectual property

 

Conclusion

It is essential to understand that IP has value; indeed, it is often the most valuable asset a company has. Whether it’s a patent for a groundbreaking invention, copyright for an original work, or a trade secret that gives your company a competitive edge, protecting your intellectual property is vital for success in today’s business landscape.

A quick guide to trade secrets

Shhh! It’s a (trade) secret

If you have a manufacturing process or a formula or even a way of doing business that is unique to you and that no-one else knows how to reproduce, then you have a trade secret.

Perhaps the best-known trade secret in the world is the original formula for Coca-Cola, which the soft drinks giant has kept closely guarded since 1891, and which is now sealed in a vault in the World of Coca-Cola museum in Atlanta, Georgia.

You probably don’t have a recipe for the next Coca-Cola in your files; but you will almost certainly have developed other trade secrets that are just as valuable to your business as that recipe is to Coca-Cola. Such trade secrets are part of the inventory of intellectual property and intangible assets (IP) you own, but unlike some IP, they can’t be registered. But that doesn’t mean they can’t be protected.

First off, what counts as a trade secret? Pretty much anything that:

  1. Is not known generally to the public, including rivals;
  2. Has commercial value because it is secret;
  3. Is subject to reasonable steps to keep it secret.

Many different things can be classified as trade secrets, including processes, materials, data, plans, financial information, recipes and formulas.

They don’t have to be 130+ years old, like the Coca-Cola formula – they could be a business plan drawn up last week – but if you have information that is unique to your business, adds value to your operations that might be jeopardised if other people knew it, and can be kept confidential, then trade secrets are likely to be an important class of intangible asset for your company. 

 

How to keep your trade secrets secret

Your trade secrets should be:

  1. clearly marked as confidential;
  2. stored and catalogued securely;
  3. only accessible to those with a “need to know.

The biggest risk with trade secrets concerns accidental or deliberate disclosure by employees, former employees or other confidants. The importance of trade secrets to the company should be made clear in employment contracts and backed up with company training.

A trade secret can be shared with people outside the company, for example professional advisers such as lawyers, suppliers or potential business partners or licensees. If such sharing is necessary, you should use robust formal legal documents such as Non Disclosure Agreements. It is good practice to have NDAs in place prior to discussing anything secret with a third party.

If you are licensing a trade secret, then the licensing agreement must obviously cover NDAs, requirements for secrecy, and audit rights for the IP owner to inspect and check the licensee’s operations to ensure the trade secret is being kept secret, as well as the usual clauses you would find in a licensing agreement.

 

Are Trade Secrets protected by law?

In most developed countries, yes. In the UK, The Trade Secrets (Enforcement, etc.) Regulations 2018 enacted the EU Directive on the Protection of Trade Secrets and is still in force despite the UK leaving the European Union.

These regulations recognise the value of trade secrets to companies and, under certain circumstances, gives them special treatment under law that can be used to stop suppliers, employees or others who obtain the information from using or repeating it without your permission.

Under UK law, though, until recently, trade secrets could not be stolen as such, because they are not registered and hence not property. So court cases involving trade secrets tended to revolve around breach of confidence, or related crimes such as fraud. 

However, the National Security Act 2023, which became law in July 2023, addresses trade secret misappropriation in the context of industrial espionage by a foreign government, making the unauthorised conduct of obtaining, copying, recording or retaining a trade secret, or disclosing or providing access to a trade secret, under certain circumstances, a criminal offence punishable by up to 14 years in prison.

US laws can be even tougher. Trade secret theft is a criminal offence if either it’s done to benefit a foreign government or company, or to benefit someone who isn’t the owner of the original secret through either international or interstate US trade. Punishments can be jail terms and/or fines – potentially in the millions of dollars. Alternatively, trade secrets owners can take civil action.

Note that that laws can’t protect a business against “reverse engineering” – for example, dismantling a product to discover how it works, and using this knowledge to create a competing product. This is considered acceptable healthy competition by the courts. If you wish to prevent this from happening, patenting is likely to prove a better strategy. 

 

Why not patent your trade secrets?

Patenting an idea can be expensive, depending on how many territories the protection is applied for, plus you are legally required obliged to explain clearly how your innovation works. In return, you get a limited-time monopoly (usually up to 20 years) on the patented innovation. After that, though, anyone can reproduce it.

Trade secret protection, on the other hand, lasts for as long as you can keep the secret.

One possible strategy for the owner of a trade secret is to have all the paperwork prepared for filing a patent, but only actually put in the application if there is strong evidence that someone else has reverse-engineered your innovation, or researchers are close to understanding the underlying mechanisms behind it. This does, however, require constant vigilance on the part of the trade secret owner; but an innovative company should always be scanning the horizon anyway.

 

Conclusion

Trade secrets can be a very valuable form of IP, so long as they are secret, they have real value, and the owner takes reasonable steps to keep them secret. While they cannot enjoy the same protection as registered IP such as patents, they do have the advantage that the can theoretically last indefinitely. But companies need to review what trade secrets they might have and how they need to be protected. This might include enhanced cybersecurity measures, more stringent company processes such as record keeping, a robust employee training program, and the widespread use of NDAs covering third parties.

How to protect your intellectual property

How to use copyright to defend your company’s IP value

Ask a company director if they have any patents or trade marks, how they protect them, and how important they are to driving their company’s value, they should be able to tell you.

But ask the same director the same questions about copyright, and most will probably find it far more difficult to answer. The exceptions will probably be those involved in creative industries where copyright is recognised as fundamental to their business, and jealously guarded.

For those who don’t work in creative industries, copyright probably isn’t something they have ever really considered as having value, or that they can use to protect themselves.

Copyright is often overlooked when companies think about the valuable IP they own because unlike patents and trade marks which have to be registered via a legal process, is an automatic right in most countries.

That means whenever someone creates an original work and ‘records’ that work, they hold the copyright to it, without the need to register it.

Records, in this sense, can mean writing, film, photography, sounds recordings, drawings, paintings, architectural plans and many more. And ‘creation of the mind’ which is recorded attracts copyright protection. It’s not just for authors, film makers, musicians and artists; it covers any written or recorded works which are original and creative.

It can apply to business documents such as brochures, presentations and strategic plans, videos and photos a company uses in its marketing, sketches and drawings, web pages… And (and this is where tech companies need to pay attention) software code and, in some cases, databases.

So long as they are original, and so long as some creative thought went into making them, and so long as they have been recorded in some form, copyright can apply.

However, for companies there is a wrinkle. Because it is the first creator of an original creative work who usually gets the copyright, you will need to make sure freelancers or agencies you use, for example to write copy or develop marketing materials, legally assign copyright to your company.

The situation is different when the person creating the work is an employee of an organisation and is doing so as part of their normal duties, then the copyright owner will be the employer, rather than the employee.

Another point to bear in mind is that copyright protects the expression of an idea and not the idea itself.

So JK Rowling owns the copyright to Harry Potter and his world, and no-one else can use her characters or her world for books, films, toys, games and the like without her permission. But she does not have copyright over, for example, the concept of a school for witches and wizards.

Aside from a few relatively limited exceptions, it is illegal to copy a substantial part or take the essence of a copyright piece of work without permission.

How long copyright last for can vary. In the UK and most other countries, in the case of a literary work, it is 70 years after the end of the year the author dies; once that 70th anniversary passes, copyright lapses from the following New Year’s Day. That’s why you’ll sometimes see articles in the media and online about which famous author’s books have entered the public domain.

Things can be a bit more complicated in the case of films, TV programmes, and recorded music, for example, as there can be multiple ‘creators’. And when an author or creator is anonymous, then usually copyright lasts for 70 years from the date of first creation, use or publication. But for most companies looking to use copyright to defend their IP, this is likely to be irrelevant.

 

So how is copyright valuable to you?

Obviously, if your company is in the creative industries then copyright is very important to you, both in terms of direct sales and also in terms of licensing. But if you operate in other industries, such as manufacturing, food and drink, of any kind of tech sector where software is important, then copyright is still hugely valuable IP for you.

You may be able to generate income from licensing copyright materials, including brand characters, advertising and even brochures from your archives (as Kellogg does, for example), although that probably won’t be the case for most start-ups and scaleups. Software you license can also be protected by copyright.

Even if you aren’t operating in the creative industries, or generating software code, you can and should stop other people using your copyright material without permission. As more commerce moves online, then unauthorised use of copyright materials is becoming more widespread across ecommerce sites.

So, if you make a consumer tech product, watch out for people selling similar products who may be using your copyright materials – like brochures, guides, photos and even videos – to push their similar products. You can use copyright to stop them doing so.

You can also use copyright to keep confidential materials secret. Process documentation in words or diagrams can be a valuable business asset, along with other employee reference points such as handbooks. Notebooks and their electronic equivalents can also attract copyright as well.

And, as mentioned above, copyright also applies to software code, because in law it counts as a subset of literary works. Copyright protects both the uncompiled ‘source’ code and the compiled versions of software. Many companies rely on this protection when licensing revenue-generative software, and it also protects code that is only used internally and never intentionally shared.

Copyright also protects the design and structure of databases – what is called the ‘schema’ of the database — and protects the creative process of deciding what data to collect and store and in what format.

Depending on its nature, the data itself may or may not be protected by copyright. Unstructured or raw data contained in a compilation of data in a database is not protected by copyright; however, if substantial skill, effort and investment has gone into its collection, it may attract a separate form of IP protection called database rights. But that’s another article altogether!

How to leverage the value locked up in your intellectual property

How to leverage the value locked up in your Intellectual Property and intangibles assets

In today’s evolving ‘Knowledge Economy’, intellectual property (IP) and intangible assets are emerging as the key drivers of business value. As aptly stated by Mark Getty, founder of Getty Images, “Intellectual property is the oil of the 21st century.” The richest individuals today have amassed their wealth through leveraging their intellectual property, underlining the shift from physical to knowledge-based assets.

This shift is evident in companies like Apple, where its net assets stood at $96.5bn at the end of June 2019, yet its market value was a staggering $904.6bn. This stark difference arises from the fact that conventional accounting rules have not fully adapted to the realities of modern business. Current regulations lack clear guidelines for valuing and unlocking the potential of IP and intangible assets such as trademarks, patents, copyrights, processes, databases, and trade secrets.

While accountants can easily assign value to physical assets like buildings, equipment, and raw materials, accounting standards require self-developed IP and intangibles to be accounted for purely as costs on a balance sheet. IP and intangible assets a company buys from another company must be recorded at the price the acquirer has paid, and this value must be written down. Arguably neither actually reflect the increasing revenue these intangibles may generate.

However, the landscape is shifting. Governments, financial institutions, and the accountancy profession are collaborating to develop methods that allow companies, particularly SMEs, to leverage the value of their IP and intangible assets without selling them. Notably, China and Singapore have introduced programs supporting borrowing against IP, and major global lenders have developed specialist lending products. In the UK, HSBC and Lombard have both provided finance packages for SMEs using IP as collateral.

For instance, in 2022, UK femtech brand Elvie secured an eight figure finance facility from HSBC UK through the bank’s new Intellectual Property lending product. The British Business Bank also launched its Enterprise Finance Guarantee (EFG) in 2009, which supports lending to companies with non-traditional assets, including IP and intangibles. This initiative has been temporarily replaced by the Coronavirus Business Interruption Loan Scheme (CBILS), providing lenders with a government-backed guarantee to encourage them to lend against IP.

In conclusion, don’t overlook the value that may be buried in your IP and intangible assets. It’s time to unearth your hidden treasures and leverage them to drive your business forward.

You can find out more about IP lending here: Inngot | IP based lending – Raise finance using intellectual property

Watch Inngot CEO, Martin Brassell, discuss IP finance and how Inngot sit front and centre with lenders to offer scale ups and growth companies access to IP finance.

IP-based finance how the orginal lightbulb moment is being brought into the 21st century

IP-based finance: how the original light bulb moment is being brought into the 21st century to help scaleups

Using intellectual property and intangibles assets (IP) as collateral to raise funds is the original light bulb moment – because it’s exactly what Thomas Edison did with his patent for the incandescent lightbulb in the late 1880s. He borrowed the money to start a company that eventually became General Electric.

So, if the most prolific patenter in the world can use his IP to raise finance, it seems only logical for today’s high-growth and scaleup SMEs to do so as well. Unfortunately, it hasn’t been that easy – until recently.

Scaleups around the world tend to face the same challenge when it comes to raising the finance they need to grow. They are usually rich in IP, but poor in tangible assets.

That’s a problem, because historically companies have used their tangible assets as collateral when negotiating for finance. Up until the 1980s, this sort of made sense. Companies invested in tangible assets like buildings, vehicles, machinery and raw materials and delivered finished, physical goods. Banks and investors could see this reflected in companies’ accounts because these items would be listed as assets. Even more importantly, they could offer loans using these assets as collateral.

But the digital revolution has changed all that. Today, the main drivers of turnover, profits and growth for most companies are not tangible assets or products, but intangible ones. According to an analysis of the companies in the Standard & Poor’s 500 index (the biggest public firms in America), 90% of their market value was made up of intangibles in 2020 [Source: Ocean Tomo]. In Europe, the same report found that 75% of the S&P 350 index companies’ value was in intangible assets.

Intellectual Property rights and related intangible assets – like trade secrets, know-how, relationships, and reputation – are now key to economic success, particularly for scaleups.

But while we’ve all heard of scaleups, how many of us know what the definition of one is? The most commonly accepted definition is the one used by the Organisation for Economic Co-operation and Development (OECD)[1]: a scaleup is a company which grows its turnover by 20% or more  or its number of employees by a similar amount over a three year period.

However, there is a disconnect facing scaleups when it comes to getting funding – particularly if they are looking to borrow from banks. Existing accounting rules were developed when tangible assets dominated, and balance sheets have yet to catch up with the seismic shift in the sort of assets that generate profits today. They still focus on tangible assets.

IP finance for the masses - Unleashing the potential of IP backed loans

But intangible assets like IP seldom appear on a company’s balance sheet. They are largely invisible, at least from the point of view of lenders and investors, and their real value, in terms of what they contribute to turnover and profits, is not obvious. If IP and intangibles do feature on a balance sheet, then it’s usually as a cost, not as a contributor to revenue and profits.

For scaleups, particularly IP-rich ones, the result has been a ‘funding gap’ where high-growth companies have been unable to get the funds they needed to allow them to grow further. In 2020, a report from the ScaleUp Institute, Deloitte and Innovate Finance estimated that this gap was around £15 billion for the UK alone[2].

Thankfully, times are changing. IP and other intangible ‘knowledge assets’ are now increasingly recognised by investors and lenders as significant contributors to business performance and value – regardless of their accounting treatment.

Unfortunately, however, IP is still treated as an unfamiliar asset class by many banks and lenders. While they understand that IP matters, and that it can drive company value, they do not see how they stand to benefit, even if it does – and they worry about what it might fetch if things don’t go to plan.

They are also constrained by rules over capital adequacy – which, put in very simple terms, means that how much they are allowed to lend overall is limited by how much cash they have in their vaults, what their investments are worth and how many tangible assets they control. Tangible assets which have been taken as collateral for a loan count towards lifting this cap. Intangible assets don’t.

So, for most banks, IP and intangibles have been considered too difficult by most banks as an asset class to consider taking as collateral for loans. There is, however, a growing band of forward-thinking lenders which are actively looking for an answer to the challenge of lending against IP and intangible assets.

This is where IP finance (sometimes referred to as IP-backed finance or IP-based finance) comes in. It allows companies with valuable Intellectual Property and intangible assets to leverage the value of these assets to get funding, by using it as collateral.

Research from the British Business Bank and the UK Intellectual Property Office has conclusively demonstrated that businesses that own IP make better lending risks[3]. As the understanding of IP and intangibles, and their impact on company success, grows, more and more banks are launching IP-based lending products.

Inngot was created to support the growth of an IP-based finance ecosystem using IP as collateral that would help SMEs unlock the value of their IP and intangibles.

On the lending side, we are already working with a number of innovative banks and lenders to help them identify the IP that’s fundamental to driving a company’s business so they can more easily value it and use it as collateral.

On the company side, we are providing directors with the tools they need to communicate the value of their core IP in language which bankers (and investors) can easily and quickly understand and which will give them the ‘comfort’ they need to hand over their money. They can also use our tools to better manage their IP and intangibles strategically to drive even more growth.

But we are going further than simply identifying and valuing IP: we have built on our existing IP identification and valuation tools by developing a new Collateral Suitability Check tool. This assesses a company’s valuable IP on three key indicators: Strength (how good the IP is in its market); Securability (how easy it is for a lender to take ownership over the relevant IP); and Saleability (how likely it is that another company is likely to want to buy the IP in question).

This tool, coupled with Inngot’s existing IP identification and valuation tools, can support new lending products which use IP as collateral – like the High Growth IP Loan proposition NatWest Group has just launched.

Products like this will make IP-based finance viable for IP-rich SMEs and scaleups. It will allow banks to lend with confidence while delivering lower financing costs for borrowers by letting them leverage the value otherwise locked up in their IP.

 

References

[1] Unleashing SME potential to scale up – OECD

[2] The Future of Growth Capital, ScaleUp Institute, Innovate Finance and Deloitte, 2020.

[3] Using Intellectual Property to Access Growth Funding, British Business Bank and UK IPO, 2018

Licensing your IP to drive growth

Monetising your IP to drive extra revenue for high growth companies

Your intellectual property and other intangible assets (IP) are the DNA of your company – they are what makes it unique and give it a competitive advantage over rivals. They are – or soon will be – the key drivers of your turnover and profits.

Bur are there ways you can make your IP work harder or smarter to generate even more revenue?

That’s where IP licensing comes in. If you have valuable patents, trade marks and even copyright materials, you could bring in extra income by licensing them.

IP licensing can take a number of forms, depending on what you own, where you have registered rights to it, and what your future business strategy is.

IP Identification and Valuation

However, before you look at any of these options for IP monetisation, it’s essential that you know what IP assets you own and how much they might be worth.

Valuing intellectual property can be highly complex and time consuming, as it requires assessing factors such as market demand, competitive landscape, and future earning potential. Furthermore, hiring an experienced IP valuation firm can be expensive.

That’s why Inngot has spent the last 10 years designing and refining its online IP identification and valuation tools – to deliver a fast and cost-effective solution for SMEs and growth companies. Our platform can provide you with an accurate assessment of your IP’s potential value, which you can then use to support discussions with lenders and potential investors, or with potential licensees or partners.

 

IP licensing

 

How IP licensing works – patents

If you have a valuable patent which is core to the products you sell in your home country, you obviously won’t want to licence it to your rivals. But you could licence it for use in other countries – assuming, that is, that your patent covers those countries, and you don’t have immediate plans to set up your own operations there.

Often, a company will be focused on one country, and doesn’t have the resources to move into other territories, at least in its early stages of growth. Registering patents in multiple countries can be an expensive process, even with developments in regional and international patent registries which cover multiple countries with one application.

An overseas company in the same business sector as you might pay handsomely for the exclusive rights to use or manufacture your patented technology in their home country, or their wider region, if your patent is enforceable there.

Or let’s assume you have valuable technology which you are using in one business sector in your home country, but which could also be used by companies in completely different business sectors in that same country.

They don’t compete with you, so you could licence the IP to one or more of these companies; they pay you a licence, and they get the benefits of your IP.

There is another possibility, which may come into play if your patent is so important to your industry that everybody needs to use it; in fact, it has been built-in to the international standards which govern how products for your industry work.

Such patents are known as SEPs – Standard Essential Patents – and there are strict rules on their licensing. The patent owner gets a huge benefit from having their invention declared an SEP; but they then must allow other companies in the same or related industries, potentially including their biggest rivals, to use their SEP for a ‘fair and reasonable rate’.

If this kind of forced licensing didn’t exist, most modern technologies would be far less well developed than they are.

Licensing your brand

A company’s brand will be supported by a range of IP including trade marks (both words marks and visual ones), registered and unregistered product designs, and related marketing collateral, such as advertising and even brand characters.

In addition, companies may have related rights, possibly including patents, which contribute to their brand image by communicating superior technology or innovation, for example.

If you have a strong brand, then you may be able to license others to use it, just as you can with your patented technology.

Usually this will allow them to effectively clone a service that you offer and then roll it out in another country. This kind of brand licensing is probably best-known in the fast food and hospitality industries – think McDonald’s, Burger King, and many global hotel chains.

Many of this sort of brand licensing agreements – like some of those mentioned above — will take the form of franchising. This is a specific form of IP licensing where you grant others the right to operate under your established brand and trade marks in exchange for upfront fees and ongoing royalties.

Brand licensing, however, can also involve another company using your brand and related IP in a completely different industry sector. So a heavy machinery manufacturer might license its trade marks for use by a footwear manufacturer, or a home appliance maker (think JCB or Caterpillar).

 

How copyright can defend and grow company value

 

Licensing copyright

Finally, most high-growth companies are unlikely to have valuable copyright assets – songs, films, books and the like: but any that do might be able to license them to bring in extra revenue.

Conclusion

IP licensing offers a range of opportunities to leverage the value of your intellectual property for extra revenue, and to expand your brand footprint into new markets. By strategically managing and maximizing your IP assets in this way, you can unlock the potential for growth and establish a strong competitive advantage.

 

Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or legal advice. It is recommended to consult with professionals specialising in IP finance and valuation before making any financial decisions or contact Inngot to discuss IP strategy, services and IP finance.