‘Falling in love’ with intellectual property – five fundamental factors for Australian SMEs

Most of the success of a modern business is in its intellectual property (IP) – those aspects of the way a business is run that are unique to it, and are the reason customers choose that business over others.

In The Australian Financial Review recently, doyen of Australian business, Phil Ruthven announced the launch of his own think tank. Aiming to inspire companies to achieve a greater return on assets, he is quoted as saying:

‘[Don’t] fall in love with physical assets……The real value and focus for companies, should be intellectual property. Australian companies haven’t understood the uniqueness of intellectual property. A company like Cochlear gets it. But businesses like retail don’t.’

Hear, hear!

If you’re successfully running a business, you probably own IP. Implementing the following fundamental five factors will help drive more focus on, and extract more value from IP as an asset class.

 1. Define a strategy

IP strategy must be aligned with, and complementary to, corporate strategies and goals. The Board should hold management just as accountable to an IP strategy as it does to conventional strategies.Corporate strategy must be established in the context of the competitive landscape in which a business operates. This context can be informed by rearward analysis of IP ‘big data’: geographically, technologically, chronologically and legally. A forward analysis of the same data can inform future innovation programmes and set the bedrock for future growth. Businesses have HR strategies, IT strategies, growth strategies, and so on, but very rarely IP strategies. And yet often, IP is the very basis for growth, and inextricably entwined in IT and HR issues, among others.

2. Understand the critical IP in your business

Work out what makes your business hum, what sets it apart from its competitors, and document it in an intangible (intellectual property) asset register. Value the assets – even empirically – and measure the return.Most businesses appreciate the basic concepts around branding and copyright, and perhaps even the application of designs and patents to new technology. But client and supplier lists, collections of data, the use of colour, contracts and agreements and even the overall ‘look and feel’ of a retail store can set a business apart from a competitor and can be managed as an asset. Most businesses have a tangible asset register and understand how those assets provide a return in investment.

3. IP is for everyone

Make sure everyone in your team understands what IP is, how it adds value to the business and their responsibility for it.If you’re talking about ‘innovation’ in your business – and many businesses are – then you should also be talking about IP. Corporate communication programmes about what intellectual property is unique to the business, how to properly use it, what to do and not do with it, how to identify it when it is being used by a competitor, and how to recognise new IP are critical to winning business, and running a winning business. Talk about IP at induction, upon exit, on the company intranet, in town hall meetings and at every opportunity in between.  

4. Make sure you own it!

The inclusion of IP clauses in all employee and third party contracts must be standard operational procedure.Ownership often starts with authorship. If suitable contractual provisions and policies are not in effect –with the author is where ownership stays! And that is generally not good for a business. The human capital that underpins every organisation’s success is at the same time its Achilles heel. An employee whose employment contract does not clearly cover her obligations in respect of IP is free to take her great ideas as well sometimes as yours to her next employer. And there goes the opportunity to leverage that information for the next deal. The same is true of arrangements for development of new IP with third parties: a practice critical to cost effective resourcing of most businesses. Handshake agreements and/or the changing hands of an agreed fee are not enough.

5.  Respect, but also leverage other people’s

IP is strongly associated with risk when improperly understood and managed. Do your homework and don’t step on other people’s IP toes. Conversely, look for ways to stand on their IP shoulders to get ahead.Owning IP allows a business to stop other businesses using the protected assets. The term ‘thicket’ is used to describe IP landscapes – the often dense legal forest through which innovators must pass to be successful. Fortunately, it’s easier than ever before to understand the characteristics of an IP thicket, and therefore, to chart a successful path through, or around it. While IP infringement is on the one hand a risk, conversely, understanding the position of other market players in that thicket can lead to opportunities for collaboration and speedier growth.

The happy ending 

Intellectual Property is not as complicated a ‘lover’ as businesses might imagine. Like humans, a little careful attention can go a long way! We fell in love with IP – and we can help you do so too!