Harnessing the Power of Intangible Assets in a Globalised Marketplace
- Alison Orr
- Sep 3, 2024
- 5 min read
In today’s global economy, intellectual property rights (IPRs) and intangible assets (IAs) play a pivotal role, offering a vital means of developing new income streams through exploitation of assets via international markets and a way to accelerate technological advancements and brand reach via international partnerships.
Whilst collaborations provide the ability to gain deeper and wider market penetration, it is important to understand what IP you own and how to manage IP at an early stage to avoid future risks.
Importance of IP in the global economy
In the current highly-digitised and remote-working world, fewer tangible assets exist. Nowadays, non-physical assets such as brands, trade secrets, digital assets and contracts make up the lion's share of a business' assets and value. A 2020 study of S&P 500 listed companies highlighted the share of IA market value increased dramatically from 17% in the 1970s to 90% in 2020.
Economic Importance of IP
As businesses increasingly rely on innovation and creativity to stay competitive, IP becomes a critical asset with tangible global economic impact.
IP drives innovation and GDP contribution, encouraging investment in new technologies and products fuelled by strong IP frameworks, with intangible investments growing at three times the rate of tangible investments between 2008-2023.
In the EU, IP-intensive industries contribute 47% of total economic activity (GDP), amounting to approximately €6.4 trillion, while in the UK, IP-intensive industries account for over a quarter of the UK’s output, at approximately £300 billion a year.
In separate studies, it was noted that IAs make up around 70-80% of a UK firm's value, whilst in China, the China National IP Administration noted that IPRs are a strategic resource for national development and a core element of international competitiveness.
IP Impact on Employment and Wages
Further benefits of IP in businesses include evidence that IP-intensive industries generate a substantial number of jobs and offer higher wages compared to non-IP-intensive sectors (paying on average 19% higher wages than those without).
Furthermore, SMEs that own IPRs have 68% higher revenue per employee than those that do not, with the highest revenue-per-employee increases linked to two IPRs, trade marks and designs together, or all three IPRs (patents, trade marks, and designs).
This shift to an intangible-led economy underscores the critical role IP plays in driving corporate value and highlights the need for businesses to embed IP management strategies, including educating their employees and partners on the nature and importance of their IAs.
Taking such steps will help to mitigate leaks of valuable IP, and an IP strategy can also help a company to capture and protect new IP, manage collaborations (especially IP ownership) and determine IP monetisation strategies
The economic impact of IP is clear, however IP remains a misunderstood asset due to confusing and inconsistent terminology used in mainstream news, and a tendency to link it to celebrity culture or a 'David v Goliath' narrative.
“But I don’t have any IP.” You do!
SMEs that do not identify as high-tech companies often assume IP is only relevant for patent-creating businesses and multinationals; not relevant to the creative sector; or that it is a cost, not an investment, to the business. Moreover, accountancy rules make it difficult to show IA value on balance sheets. Therefore, SMEs often struggle to recognise the value of their IAs – this disconnect stemming from limited resources, lack of awareness of IAs and IP, and the perceived complexity and cost of IP management.
Acknowledging your business is full of IP and IAs and that it may not be as expensive as you think to leverage them internationally through IP protection and management strategies is key.
The IP Family is Bigger than you may Think
It is made up of a bundle of rights – recognised legal rights that fall within the strict definition of formal IPRs, wider IAs and Intellectual Capital that most businesses rely on.
IAs are often ignored despite determining how much the IP is worth and supporting a strong exit. IAs such as know-how, processes, contracts (licences, franchises etc.), customer relationships, supplier relationships and accreditations all have to be in place, working alongside IPRs.
SMEs will appreciate the importance of ‘human or intellectual capital’ – employees are a company's biggest asset, but not an asset the company owns. They harbour important know how, which if not captured, codified and converted to IPRs may damage ability to achieve future IP licensing income or be lost to a competitor.
At its centre are Formal IPRs, which comprise registered and unregistered rights covered by statute. These include patents, trade marks, designs and copyright, as well as less well-known rights formally recognised in law, including plant variety rights, database rights, semiconductor topography rights and trade secrets.
Patents
Protect new innovative ideas and functionality
Apply for protection before disclosing the idea
Protection can last for up to 20 years (or longer in the case of pharmaceuticals)
Patents protect novel and inventive technical products and/or processes. They can be used for incremental improvements such as methods of manufacturing an end product with enhanced technical properties (e.g. compact form, hard-wearing, cheaper/more efficient manufacture). The novelty requirement means it is imperative to apply for a patent application before you disclose your invention in most countries.
Trade Secrets
Protects secret technical and commercial information
‘Reasonable steps’ needed to maintain confidentiality
Can last indefinitely if confidentiality is maintained
Trade secrets may be preferred over patents for innovations that can be kept confidential and are not easily reverse-engineered (e.g. recipes, formulae, technical or business processes). However, businesses must take reasonable steps to maintain confidentiality and trade secret protection, including tangible and digital security procedures, highlighting the need for a trade secret management strategy.
Copyright
Protects original creative works, artistic, musical and literary works, including software code
Protection arises automatically - but not for an ‘idea’ (important to capture ‘date of creation’)
Long lasting right
It also isn't all about patents – copyright is an abundant IPR in businesses. It is associated with creative works including artistic, literary and scientific works ranging from books, music, paintings, sculpture and films, to databases, advertisements, maps and technical drawings. Copyright covers original and derivative works (e.g. adaptations, compilations, transformations, translations or arrangements) and software code. Although many laws are harmonised, not all countries offer a formal copyright registry.
Trade Marks
Protect the reputation and goodwill in brands
Can be registered or unregistered
Protection can last indefinitely
A trade mark is a sign used to distinguish goods and services of one company to another in the market. It grants exclusive rights to use the sign for categories of goods and services used and registered (similar marks for non-identical goods and services can potentially co-exist in the marketplace). Trade mark types are broad and may consist of words (plain text), combination of letters (from Roman script to Chinese characters), names, phrases, logos, symbols, designs, images, distinctive features or combination of elements that can be represented graphically.
Designs
Protect the appearance of products
Regimes for both registered and unregistered designs
Protection can last up to a maximum of 25 years
Designs protect the visual appearance of a product or its packaging, providing exclusive rights to the unique look of your products, such as shapes, patterns, colours, or even the graphical user interface of a digital product.
Plan for Growth
Understanding the nature of IPRs as part of a robust IP management strategy is key to harnessing the full economic potential of your IAs. Effective IP management not only safeguards your innovations and creative works but also enhances your competitive advantage in the global marketplace by enhancing brand recognition with trade marks; boosting company value for investment and exit; generating income through licensing and royalties; safeguarding R&D investments; strengthening your position in legal disputes; and building customer trust with protected, recognisable products and services.
IP ensures long-term sustainability and is a cornerstone of modern business success.
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