article / 11 May 2020
How to use your IP in times of crisis – 8 ideas to turn hardship into opportunity
The shock of the global coronavirus pandemic has been sharp and severe for many companies. Businesses worldwide have been affected by both the virus itself and the mitigating strategies that have been adopted by companies and governments. The crisis may threaten the existence of some companies, while creating opportunities for others.
At times like these, it is more important than ever to identify any unexploited resources that might help your business. Many companies are in possession of intellectual property (IP) assets that they are not aware of, or that they are not using to their full potential. Once identified, managed and put to use, these intellectual property rights (IPR) can generate value. In other words, they could prove very useful for struggling businesses, or enable investments for those who see opportunities and thus gain a market advantage.
First, what is IPR and where do you find it?
Compared with most other types of company assets, such as goods in stock or production machinery, IP is typically more difficult to identify. IP resources can include a variety of intangible assets such as patents, trademarks, designs, copyrighted material (such as texts or images), company names, data, databases, source code, domain names, trade secrets, social media pages, apps, methods and general know-how. The first step in utilising your IPR is therefore to identify what intellectual property assets your business actually possesses.
You then need to put your IPR to use. Below we have identified eight ideas to consider when managing your IPR portfolio to meet the challenges of the current pandemic.
1. Internal due diligence and protection of IP
First, take some time to screen and do a stocktake of your business’ IP assets. Companies should ask themselves whether their IP portfolio sufficiently covers the specific products or aspects of the business that are essential. In some cases, internal due diligence might even reveal IP assets that are superfluous or where an IP registration for other reasons might be abandoned to streamline the IP portfolio and cut down on expenses for IP registration maintenance (more on this in point 3 below).
In corporate groups, it could also be worthwhile examining whether valuable IP assets are owned by the right company within the group. An arrangement whereby IPR is transferred to one particular entity within the group and internal licences for use are issued to other group entities could be considered in order to exploit and protect the IPR more effectively.
2. Security for loans and financing
As previously mentioned, registered IPR assets can have great financial value and may therefore be useful for a struggling company. Many companies are not aware of the possibility of pledging registered IPR assets, namely patents, trademarks and design (as well as applications for any of these), to use as security for funding from, for example, banks and financial institutions. The pledge agreement should be registered in the applicable registry to secure the right of the pledgee.
3. Sell off IPR not in use
During times of financial hardship, the old rule of ‘cash is king’ may apply more than ever.
Through its ‘stocktaking’ process, companies may realise that they own IPR assets that are not worth maintaining or that are not core to the business. Consider whether your company holds any such IPR assets that are not in use and are therefore superfluous, or that are of limited value to your business. Such assets could potentially be sold, ideally without any adverse long-term effect on the business.
A licence allows you to grant someone else the right to use your otherwise exclusive property. IPR licences typically concern trademarks, designs and patents (all which can be registered), but don’t forget about other types of IPR like copyrighted materials such as software, data and the general technical or commercial know-how of your company. IPR licensing can be an efficient way to increase current revenue for a company. For example, a company could consider licensing without any negative effect on its own business for use for other types of goods or services , in other geographical markets, other business segments or types of use other than those for which the company itself exploits the IPR. Additionally, by reaching other markets or segments through a licensing partner, the value of the IPR asset itself could actually rise as a result of the increased exposure. Another option is to license your IPR to a competitor, especially for a company that otherwise spends a lot of time, money and effort defending the IPR from infringement. This could free up resources from legal proceedings and the defence of rights to expansion and development of the business.
Through the terms of the licence agreement, the parties can agree on payment (for example through a one-off fee and/or a recurring royalty), where and how the IPR is allowed to be used, the division of responsibility between the parties and when and how the licence may be terminated, all of which should be carefully considered.
5. Sale and leaseback
As an extension to the above point regarding the sale of assets not widely used by the company, a sale-and-leaseback setup could be an option. This would, for example, be beneficial for a company that needs to increase its liquidity, as it could allow funding to be obtained quickly without losing the right to access and use the IPR asset in its own business.
6. Development of new IPR
If order intake diminishes due to the pandemic, consider shifting focus to internal development work that can help kick-start your company once the situation stabilises, or to produce assets that can be sold or licensed. Suitable areas might include the development of inventions, concepts, know-how and trademarks, or even investigating entirely new fields of business. Think outside the box!
Businesses may of course question whether it is sensible to invest in IPR in challenging times. However, research suggests that crises inspire more novel ideas, critical innovations and pioneering start-ups, so the opportunity may be just right to spend some time investigating potential strategic moves. Furthermore, the process of securing registered IPR (particularly in the case of patents) can be time consuming, so it’s worthwhile preparing in advance of the intended use of the IPR. When the pandemic is over, companies that have maintained the pace of development while competitors have been more defensive are more likely to have superior leverage and a head-start after the crisis.
In this context, it should also be noted that there are several governmental funds and financial assistance that can be applied for to support companies’ technological transformation efforts. Vinnova and Tillväxtverket (the Swedish Agency for Economic and Regional Growth) are examples of two Swedish government portals to look up and find out whether your company is eligible for financial conversion support for introducing new technology.
7. Review of contracts
Review relevant agreements with your business partners, suppliers etc. to see how IPR are handled. If, for example, your business partner were to enter into bankruptcy or sell off their share of the company due to financial difficulties, you could find that you lose the right to use IP assets that are critical to your business or that valuable know-how or rights in and to project results (perhaps even created jointly by both your companies) disappear. This risk could be mitigated before the situation arises by reviewing essential contracts. Perhaps an additional agreement or addendum could be entered into to secure valuable IP assets for your business?
8. Market review and potential enforcement
Finally, with more time on our hands it could be good opportunity to conduct an online market review to see what competitors and other more or less reputable actors are up to. A simple Google search could allow you to discover unauthorised use of your IPR. This might include the sale of counterfeit products, other unpermitted use of your trademark, patent or design, web search advertising (such as Google AdWords) that uses your trademark or tradename to draw traffic to someone else’s website, or misleading use of a confusingly similar domain name to yours. Depending on the circumstances and the type of use, it could be possible (and sometimes even advisable) to take action to remove such use. Enforcement of IPR as in the above-mentioned scenarios could, besides ensuring that your IPR is maintained and increases in value by deterring infringers, lead to a welcome financial boost from compensation and/or damages you may be entitled to.
Setterwalls has a large, reputable IP team with vast experience and high ratings from international legal ranking institutions. We can of course help with all stages of identifying, registering and evaluating your IPR assets, as well as assisting in establishing a suitable solution for your company. Please get in touch to find out what we can do for you.
The content is a general description of informative nature only and is not legal advice to use as a basis for assessments in an individual case.