In the dynamic world of start ups, where innovation and competition are at the forefront, a business' intellectual property (IP) can be the key to success. Establishing and managing a strong IP portfolio can offer numerous advantages and can provide a business with a competitive edge, protection, and potential revenue streams.
In this article, we will delve into the reasons why start ups should consider investing in building and strengthening their IP portfolio.
1. Competitive advantage
Establishing a strong IP portfolio can grant start ups a significant competitive advantage. Intellectual property assets such as patents, trademarks, design registrations, copyright, and trade secrets can help differentiate a business' products or services from those of competitors whilst enabling the business to safeguard and protect their innovations.
2. Market positioning
An IP portfolio can enhance a start up's market position by demonstrating its commitment to innovation. Having registered IP in place (such as patents, trademarks or design registrations) can help add to the business' credibility whilst also serving as a valuable marketing tool.
3. Protection from infringement
In today's highly connected world, the risk of IP infringement is ever-present. Building a strong IP portfolio can help protect start ups from competitors that might be attempting to exploit their ideas or creations. By obtaining patents, trademarks, or design registrations, start ups can take legal action against those infringing their rights. Therefore, a strong IP portfolio can be a significant deterrent to potential competitors considering copying a start up's innovations.
4. Potential revenue streams
An often overlooked benefit of an IP portfolio is the potential for generating revenue. Businesses can monetise their IP assets through licensing or strategic partnerships. This allows a business to capitalise on its innovations - even if they haven't fully developed the means to bring an innovative product or service to market. Licensing agreements can provide a steady income stream, while partnerships enable start ups to leverage the expertise and resources of larger players, which can help lead to accelerated growth.
5. Attracting investors
Investors are increasingly aware of the value of intellectual property when assessing the potential of start ups. A robust IP portfolio can make a start up more attractive to investors, as it signifies a barrier to entry to the market for competitors and the potential for strong returns on investment. Investors view IP as an indicator of the start up's ability to protect its innovations and secure a sustainable market position, making it a crucial factor in their decision-making process.
6. Enhancing exit opportunities
For many start ups, an eventual exit through acquisition is a primary goal. A well-developed IP portfolio can significantly enhance exit opportunities. Acquirers often highly value startups with a strong IP position, as this allows them to gain exclusive rights to innovative technologies, expand their market share, and/or prevent competitors from commercialising protected innovations. A robust IP portfolio can therefore command a higher acquisition price, providing a lucrative return for start up founders and investors.
7. Corporation tax saving
In the United Kingdom, there is an additional incentive for companies to invest in IP, known as the "Patent Box". The "Patent Box" is a tax incentive which enables companies to benefit from a reduced rate of corporation tax (10%) on profits derived from inventions covered by a UK patent.
The "Patent Box" tax incentive applies for the lifetime of the patent from the date it is granted. This could be for a period of approximately 17 years. As a result, this significantly lower corporation tax rate could potentially provide a substantial financial advantage and serves as a powerful incentive for start ups to build and protect their IP assets.
In conclusion
In the competitive landscape of startups, building an intellectual property portfolio should be a strategic priority. The advantages of investing in IP are far-reaching and can significantly impact a start up's success and growth trajectory. From gaining a competitive advantage and protecting innovations to attracting investors, generating revenue streams and reducing tax payments, an IP portfolio is a valuable asset for any startup. By recognising the power of intellectual property and taking steps to build and protect it, startups can position themselves for long-term success in their respective industries.
Copyright 2023. Featured post written by Kate Butler, Chartered Patent Attorney - European Patent Attorney, Sirius IP.