Intellectual Property is an asset that has the potential to be more valuable to your business than tangible business assets and should be protected as much as possible. A famous trade mark or a market leading patent may be of far greater value to a company than its physical assets.
Regardless of what industry your business operates in, it will most likely encounter, create and use IP. This is why it is crucial that businesses identify, protect, and commercialise their IP as they would any other asset. It is important to get ownership and trading structures ‘right' from day one, as businesses choosing not to secure their IP at the outset risk losing any possible monopoly right.
The lifecycle of an IP right begins with identifying the IP that will (or might) arise in the course of the venture. The second step is defining and protecting the IP. The third step is transferring the IP by sale or licence for commercial gain.
Your IP could be registered or unregistered, and may include one or more of the following; patents, designs, plant variety rights, trade marks (registered IP rights), copyright, confidential information, know how/trade secrets, unregistered trade marks, or goodwill (unregistered IP rights).
Properly protecting your IP provides your company with an exclusive right to exploit it and profit from it within its field of commercial endeavour; a monopoly right in other words – although this will be subject to some statutory limits and timeframes.
Step 1 - Identify the IP you Want to Protect
The first stage is the identification of your potential IP. Once identified, you can think about whether it should be registered (patents, designs, trade marks, plant variety rights) or whether it will remain unregistered (copyright, unregistered trade marks, know-how, trade secrets, confidential information, goodwill).
Your IP could consist of multiple elements. Using the example of a novel invention; your IP could consist of copyright in the software used in creating the product, a design registered to protect its visual appearance, and a patent providing you with the exclusive use right to your invention.
Step 2 - Protect It
The second stage is crucial; protection. Protecting your intellectual property through registration will prevent it from infringement or unauthorised use.
For trade marks you can make an application to the Intellectual Property Office of New Zealand ("IPONZ"). If your trade mark is sufficiently unique, and meets the other criteria under the Trade Marks Act 2002, it should be granted. Patents involve a similar application process to IPONZ, however more technical information will be required. If your application is successful, you will gain an exclusive right to use the trade mark, name or patent in your specified territory.
Registration gives you the ability to secure monopoly use rights for your name, logo, product, invention or design. It also provides you with legal rights should competitors try to copy or closely imitate your IP. If a dispute arises, you can enforce your right against any copiers.
Unregistered IP rights will require very clear documentation of your creative process to ensure you have evidence to assert ownership if need be - such as a written process or draft designs. You should also assert copyright in the name of the legal owner, setting out its year of creation for limitation purposes.
Step 3 - Commercialise
Once identified and protected, owners and creators of intellectual property rights can seek to exploit those rights for their economic benefit. Registered patents, trade marks or designs can be bought, sold and licensed.
(a) Licence Your IP
A licence is a contract where the IP owner (licensor) gives permission to a licensee to use but not own the IP assets
under agreed terms and conditions. The licence may be restricted by a time limitation or a market territory restriction.
You could licence your IP to third parties in your territory or field, or in others.
Licences could be exclusive or non-exclusive; a non-exclusive licence meaning that the owner of the IP can grant
more than one licence and can continue to use the IP themselves. An exclusive licence means only one licence is
granted and the owner cannot use the IP themselves for that period.
A licence right that is transferable is commercially valuable because it is "property". Licensing your IP will mean that
your company will have a flow of royalties over the agreed period. For example, a trade marked logo for a sports team
can be licenced to merchandise companies on certain conditions, financially benefitting both entities.
(b) Sell Your IP
Another option is 'selling' or assigning your IP to another entity in return for a lump sum. If you are planning on winding
up your company, you can sell your IP like you would stock, plant, or other aspects of your business. You can transfer
ownership by executing an IP assignment before your company is wound up or sold. For this to occur, it is important
that your IP is clearly identified and ring-fenced away from your business, as we have discussed above.
Although protecting your IP involves start-up costs, proper identification and protection will result in commercial gain down the line. It provides your company with stronger use rights, protection from infringement, and a legal right to enforce against other entities. Investment made at the initial stage will result in strong returns throughout trading and on exit.
For further assistance in this area, please see our other article on more specialist corporate structuring If Technology is Your Business, Protect It
We can assist you at all stages of the 'life cycle' of your IP asset, so please get in touch and direct any enquiries to:
See our Expertise pages
© McVeagh Fleming 2021
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.