Intellectual Property Rights: Adding Value to Your Business
By Blair Beven | Principal
Did you know that businesses that own intellectual property rights, generate 20% higher revenues per employee than their competitors without this protection?¹ When people think of intellectual property, they often think of simple trade marks, or copyright, or a patent that’s taken forever to be registered. However, as we are about to explore, IP rights can also be a game-changer for a business’ value.
What is ‘intellectual property’?
Intellectual property (or IP) is a term used to describe ‘creations of the mind’, such as inventions, artistic works, designs, and brand names. Although no one can ever technically ‘own’ an idea, it’s when creators start to express these ideas and turn them into something tangible that IP is created.
IP law works by granting creators and inventors exclusive rights to their creations for a limited period of time. These rights are protected through legal mechanisms such as copyright, or registered rights including trade marks, patents, and design rights. Ultimately, they allow businesses to protect their creative assets, profit off them, and earn recognition.
An example that illustrates the value of intellectual property law in Australia occurred when our Principal Partner, Blair Beven, worked on a deal involving the acquisition of a business by an ASX-listed company. He discovered that the value of the company being sold was entirely based on its IP – there were no physical stores, equipment, or warehouses. However, this company was not aware of its own IP, nor of its significant value. After a comprehensive database was created using a robust IP strategy, the company went on to be sold for $180 million.
Understanding intellectual property’s competitive advantage
IP is what’s known in the legal world as an ‘intangible asset’. This means that it is a non-physical asset which, despite not existing in a tangible form, still holds significant value for a company. This value comes from either intellectual rights or legal rights, and is something that has steadily increased in importance over recent times. In fact, a 2023 report by Ocean Tomo found that intangible assets represent, on average, 90% of company’s value, compared with just 17% in 1975.²
As an intangible asset, IP is incredibly valuable as it helps gives business owners a competitive advantage in their market. There are different types of intellectual property, and some common ones are:
Trade marks
A great example of this is the iconic Vegemite name. Its savvy founders first registered its trade mark in 1982, so when Bega bought it over 30 years later in 2023, they ended up paying $460 million for it. How come? Because as a registered trade mark, ‘Vegemite’ has built up significant goodwill with consumers over time, and has become a world-recognised brand with an inextricable link to Australian culture. Not bad for an eight-letter word!
Patents
Firstly, what are patents? Patents grant inventors exclusive rights to their inventions for a limited period of time, giving them a competitive advantage. Canva holds multiple patents globally, which means that this Australian start-up has exclusive rights to its inventions for a limited period (depending on which country they are registered in). This prevents other companies from copying Canva and offering their own versions of its products. Canva is now worth billions and has a considerable market share, encroaching on the likes of software giants such as Adobe and Microsoft.
Design rights
Design rights protect a product’s visual appearance, which can include its shape, configuration, pattern, or ornamentation. The luxury fashion brand, Zimmerman, has design rights in Australia to safeguard its garments’ unique aesthetics and to maintain its competitive edge in the ready-to-wear market.
Using intellectual property to increase business value
In the due diligence process, IP assets are one of the first things investors look at, because they are critical indicators of a company’s value, competitive advantage, and growth potential. International studies estimate that patents and trade marks can boost a startup’s value by around 20% in the early stages and financing rounds.³ Having an effective IP portfolio is also attractive to investors because it reduces the risk of legal challenges down the track.
Why licencing agreements are valuable
Finally, IP rights are considered valuable because they open the way for licensing fees. Many of our clients register IP rights, so they can grant licenses for their patents or trade marks to other businesses and parties, which means the other companies can use their IP in exchange for royalties. This setup allows the licensors to generate revenue, while still maintaining ownership control of their IP.
At XVII Degrees, we specialise in intellectual property law, with a goal to transform businesses into internationally recognised brands through strategic utilisation of IP. If you are interested in discovering how your company could gain advantages by applying for an IP right, reach out to us at www.17degrees.com.au and connect with one of our experienced IP lawyers.
References:
[1] European Patent Office (EPO) & European Union Intellectual Property Office (EUIPO). (2019). Retrieved from https://www.epo.org/en/news-events/news/owning-ip-rights-puts-european-firms-ahead
[2] Ocean Tomo. (2023). Intangible Asset Market Value Study. Retrieved from https://oceantomo.com/intangible-asset-market-value-study/
[3] Hsu, D. H., & Ziedonis, R. H. (2013). Resources as dual sources of advantage: Implications for valuing entrepreneurial-firm patents. Strategic Management Journal, 34(7), 761-781. https://doi.org/10.1002/smj.2037
