Intellectual Property has been accepted as a business asset. However, many businesses do not understand how to effectively use their IP assets.
What is a Business Asset?
A business asset is a valuable item, which a company can use to generate revenue for the company. These assets broadly fall into two categories:
Physical assets: These include buildings, machinery, financial assets and infrastructure.
Intangible assets: These range from human capital to ideas, brands, designs and other intangible fruits of a company’s creative and innovative capacity.
Traditionally, physical assets have been responsible for the bulk of the value of a company. This is because it is quite easy to measure the value generated by these assets.
However, the situation has changed significantly in recent years,
Companies are increasingly realizing that intangible assets are becoming more valuable than their physical assets. This is a result of improvements in information technologies, and the growth of the service economy. However, many companies seem confused about this asset class. Questions have arisen around IP valuation and its use as collateral security for loans.
In short, large warehouses and factories are increasingly being replaced by powerful software and innovative ideas. We expect this trend to increase as IP becomes the main revenue source for more companies. In sectors where traditional production techniques remain dominant, continuous innovation is becoming keys to greater competitiveness. This is important in fiercely competitive domestic or international markets. Therefore, Intangible assets have taken centre stage, and SMEs should consider how to effectively use their intangible assets.
How Businesses use their Intellectual Property
In their book, Edison in the Boardroom: How Leading Companies Realize Value from Their Intellectual Assets, Julie Davis and Suzanne Harrison identify five levels of sophistication in the way that companies approach the management of their IP. This hierarchy is a useful way to think about company expectations.
Defensive level: Companies at this level use their IP for defensive purposes only. Their goals are to protect their own innovations. This ensures they don’t infringe the IP of others. They also work hard to obtain more IP. The costs in filing fees, enforcement and other legal expenses can be high.
Cost control level: Companies at this level still have a defensive approach, but now focus on finding ways to obtain protection while simultaneously minimizing the costs of creating and maintaining their IP.
Profit Center level: Companies at this level license out their IP, or use it to generate profits. Companies here include Miniso, Burger King, and UAC (owners of Mr. Biggs)
Integrated level: Here the company’s business units have grasped the power of using IP for a range of business roles. IP use becomes integrated across all of the company’s business activities.
Visionary: At this level, companies take a long-term view of the company’s role in business and in its industry. Additionally, they seek to use the company’s IP to create more strategic value.
We need to be careful not to infer that the highest level equates to the “best” level of IP management. What matters is to determine which level best suits the needs and capacity of your particular company. The company needs to be clear about the business value it expects to receive from its IP. This is an important first step toward determining whether the company aspires to obtain business value from its IP. Alternatively, the company may wish to obtain purely defensive value from its IP.
One crucial way of doing so is by legally protecting intangible assets and, where they meet the criteria for intellectual property protection, acquiring and maintaining IP rights. IP rights may be acquired in particular for the following categories of intangible assets:
- Industrial Designs
Would you like to profit from your Intellectual Property?
Managing IP to extract business value is a new and still evolving field. Upscale Business Resources provides Trademark registration and IP Advisory services to individuals and Businesses.
Contact us today to book a consultation