August 22, 2022

Getting more value out of your IP


First published in FMCG Business August 2022 issue.

While many FMCG businesses are pretty savvy around protecting their Intellectual Property (IP), they often overlook the potential value of it. Good IP portfolio management can help businesses to better realise the economic benefits of their intangible assets.

The value of a registered IP right can be linked to the exclusivity it confers on the owner. Those who hold registered IP rights such as Patents and Designs, can exclude others from using, manufacturing, or selling similar products/services without their permission. The owners of registered Trade Marks, are able to prevent others from using any identical or confusingly similar mark in the category of good/services it is registered in. This exclusivity confers a significant competitive advantage to the owner of the IP.

This is where licensing based revenue streams can be considered. Often licensing is put in the too hard basket for businesses, when in fact it can be a very simple and straight forward process. An IP licence is essentially a contractual agreement between the IP owner (licensor) and the other person or business (the licensee), where the licensor permits the licensee to use, but not own, certain IP assets under agreed terms and conditions. By licensing out your brand names, patented products/designs/services, or even backend technologies, to the appropriate licensees, you can obtain a steady revenue stream in terms of royalties. This can allow you to access different geographic areas or markets without forking out huge capital investment, and the licensee bears most risk. The stronger the IP protection, the better from a licensing perspective. It is also possible to licence know-how and trade secrets, which have little if any formal protection. These licenses can be extremely lucrative although the weaker the IP, the more difficult it will be to require higher royalty rates and/ or attract licensees.

If there is a significant number of competitors in the market, then there are numerous potential licensees. The determining factor will be the degree to which the new product/service or innovation will provide an advantage to one of these operators over their competition, without cannibalising its existing business. Enforcing your IP is just as important as protecting it in the first place. This becomes even more relevant if you are considering licensing your IP as you will need to be proactive in defending any infringement of your IP rights to be able to confer the full benefits to licensees.

For example, brand equity refers to the value of a brand name that a company has. A company’s brand can often transform into one of its most important assets as it inexorably becomes associated
with its products and services. However, a company’s brand equity can be greatly affected if the company is not enforcing its Trade Mark rights in the brand and preventing misappropriation or dilution of its brand.

If you have no current or future plans to use your IP, you could potentially sell it. Often in the FMCG sector companies are innovating and coming up with new products and brand names left right and centre, whereas older products and their accompanying brands or sub-brand fall by the wayside. When not using it, you can sell your IP just like any other physical asset. An assignment of IP transfers legal ownership and title and is required to effect this permanent change.

Good IP portfolio management takes a holistic view and not only aligns the IP strategy with the business strategy, but also maximises the economic potential of these intangible assets. Much will also depend on the current competitive landscape as to whether licensing, assignment or litigation could be appropriate in adding value to your IP portfolio.

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