Founders’ Friday: Owning IP Increases Business Value

Founders’ Friday: Owning IP Increases Business Value

Don’t just think about IP ownership in a vacuum.  Think about IP from a business perspective, or, perhaps, as Puff Daddy said best: “It’s all about the Benjamins baby!”

Once Founders have made the decision to protect their business’ Intellectual Property (“IP”), whether it be in the form of a trademark, patent, copyright, trade secret, or domain name registration, it typically becomes apparent that having ownership of such IP increases the value of their business. Of course this extends to the traditional sense of intangible property on a Balance Sheet, but it also stems from the monetization opportunities created by the proper ownership of IP. So, as discussed in last week’s What’s Your Big Idea post, start by identifying, securing via registration and owning your IP.  Once you own your IP, you can focus on ways to maximize that IP’s impact on your company’s value. From monitoring infringement to licensing to marketing, Founders who take time to protect their business’ IP will appreciate the various ways that IP can create substantial value, both initially and into the future.

Infringement Monitoring and Policing

As a Founder’s business becomes more successful and recognizable, the potential for infringement increases. With the business’ growth, Founders should consider developing an infringement monitoring plan to ensure that no infringement goes unnoticed. In the event that infringement is discovered, cease and desist letters are typically an effective means of policing and eradicating infringing uses of IP. Having registered IP gives these letters strong legal leverage and, most importantly, amplifies the monetary settlement (e.g. royalty payment) a business could demand as a result of infringement.

Marketing Benefits

Any time a business can place the ® next to their registered trademark or indicate the existence of a patent (pending or issued) on their advertising, packaging, or website, the perceived value of the business goes up. In particular, products that have patents often give businesses a more cutting-edge, high-tech image, which can provide a serious leg up on competition.

Licensing

Perhaps Founders see their business working with other businesses to help expand their national or global presence. Licensing is an effective way to ensure that more consumers see a business’ IP while also strengthening contacts. A license allows another business to use—but not own—the IP, while making payments in the form of royalties to the Founder’s business. Having this additional source of income will in turn generate more value for the business.

Stock Benefits

Intellectual Property stocks are hot! Investors often consider a business’ IP Portfolio prior to investing, viewing the companies that own IP as being more innovative. Oftentimes, the greater the investments in a business, partially based on IP ownership, the greater the value of that business.

Business Mergers & Acquisitions

Even though Founders are often more focused on getting their business off the ground, it never hurts to think ahead to a time when the business might be merged with or acquired by another entity. In that event, having a robust IP Portfolio increases the amount for which a business may get acquired.

These are just some of the ways in which IP can increase a business’ value. Founders should take these into consideration when determining how to capitalize on their business’ registered IP as much as possible. In the long run, owning registered IP will serve a Founder’s business well and increase value substantially.

 

Founders’ Friday is a series published by attorney Brian A. Hall of Traverse Legal, PLC d/b/a Hall Law on Fridays dedicated to legal considerations facing founders and start-ups. This week’s post contributed by attorney Mallory Donick.