business owner in workshop reviewing intellectual property for smes on laptop

For many SMEs Intellectual Property is their most valuable asset, however, it is a truism that many people only come to my door when there has been a problem.

Rather than take preventative action, businesses often wait until a problem has grown to the point at which it can no longer be ignored.  Of course, by this point, fixing the issue has become an even bigger deal. In contrast, if dealt with swiftly at the outset, many of the bigger problems can be avoided.

Triggers for Intellectual Property Issues

There are many triggers which can make IP issues come home to roost, often it is when seeking investment, or an exit, or trying to rely on IP to stop an infringement.  Whatever the cause, these IP issues can derail a business. After all, for many businesses, their IP will be their most valuable asset, it’s just that many businesses do not realise it.

Top 5 Intellectual Property Regrets for SMEs

Here are my top 5 IP regrets that I see from businesses at the moment:

#1 – Choosing the Wrong Brand

There are many ways in which this can go wrong but, essentially, they all boil down to not doing your homework.

For many start-ups there will be a desire to create a brand or company name which educates customers as to what they do. This can lead to a descriptive brand – and descriptive brands are hard to protect. Choosing a brand which cannot be protected means that, in time, you may struggle to grow the business or to stop others who try to imitate you.

Keeping an eye to the future is also important. The idea of trading overseas may not be on your radar but, if that changes, the brand you choose now, for your home territory, can have a major impact on the success of any export strategy. Most businesses will not want to use different brands in different territories so, it is important to think about how your brand choice will translate (both literally and conceptually in overseas markets).

Finally, the idea of checking the trade mark registers for identical or similar marks (including spelling variations, phonetical and conceptual similarities etc) may sound obvious but it is surprising how many businesses fail to do this, resulting in them using a brand which infringes third party rights.

#2 – Cutting Corners

There will never be enough budget for everything you want to do but often, it is the IP budget which gets cut.

As an IP lawyer, this always strikes me as odd, although you would expect me to say that!  Given that IP is often the most valuable asset a business has, businesses tend to spend a disproportionately small amount in looking after it.

Imagine for example that you had to choose between replacing a new fleet of vehicles or going through a total rebrand. Most businesses would choose to replace the fleet rather than start again in building a reputation, yet many do not take ownership of their brand through the trade mark system. You could make the same argument about other IP rights and not just in respect of a business’s ability to use them, but also their ability to stop others from imitating.

This mind set means that businesses will often try to cut corners. Perhaps they will not make any filings or perhaps they will make a minimal effort. Some may consider making filings themselves, cutting out the lawyers. Whilst it may be simple enough to fill in the relevant forms, there is a difference between completing the forms which may secure a registration and securing the right registration.

IP can be complex so I would urge businesses to take expert advice before making filings. Yes, it will cost you more but experts are there to make sure you get the right IP for your needs. We have one of the largest specialist teams in the UK but, even if you decide not to use us (and we hope that you do), I would urge you to take advice.

#3 – Avoiding Difficult Conversations

Perhaps because IP is intangible, you can’t see it or pick it up, it often stays out of mind until problems occur.

A symptom of this is that fundamental issues often get overlooked.

Sometimes, the business owners are aware of the issues but try to push them to the back of their mind rather than deal with them.

A typical example of this is the failure to address key issues around ownership. This can be an issue with the ownership of IP between co-founders or with collaborators who may have contributed (such as web designers, manufacturers etc).

At some point, there will need to be a conversation between co-founders or with collaborators as to where ownership of the IP is going to sit.

Between co-founders, this is often ignored, perhaps out of a desire not to rock the boat. When things are going well, it is difficult to imagine that at some point the co-founders might have different views as to how the business should evolve or even that they might fall out. In reality, these things happen all the time – the sooner co-founders can have a discussion about where the IP is going to sit, the less problems they will be creating for the future.

The same is true where third party collaborators are used. In the absence of an agreement to the contrary, collaborators will own the IP which they create, even if they are paid for their work. Discuss this with collaborators at the outset, rather than leave key assets in the hands of a third party.

One final word on this. Sometimes, rather than face up to the issue, businesses will try to agree to the joint ownership of IP. As a general rule, don’t. This simply does not work for many types of IP and creates unnecessary risks. Often, businesses go down this route when they cannot agree ownership but really, what they are usually interested is not so much the percentage of ownership that they have as the percentage of revenue they are entitled to. There are two separate conversations going on here, who owns the IP and how are the revenues split, the two issues should not be confused.

#4 – Focus on The Wrong IP (The Patent Myth)

Many businesses, wrongly, associate IP with patents. Whilst patents are an important part of the IP toolkit, they are not the only tool in the box.

All too often, businesses focus on patent registrations, perhaps in circumstances where they do not need them. In these circumstances, not only are they focusing on the wrong IP but they are also missing out on the areas of IP they should be concerned with whilst also spending budget on patents which could be better spent elsewhere.

There are a number of reasons for this over-reliance on patents. In many industries, there is a kudos attached with having a patent, patents get the lions-share of press coverage when it comes to IP and often investors will actively encourage patent filings. Unsophisticated investors may even press for patents where they are not needed, simply because they themselves do not understand the IP landscape.

So, whilst there will be times when patents are the right thing, most businesses do not need them and should focus instead on an IP strategy which reflects what they truly need. Each businesses IP strategy will be as unique as that business, don’t assume what’s right for others is right for you.

#5 – Failing to Control IP

Having registered IP, businesses still need to control how customers engage with it. This is where licensing comes in.

All too often, businesses implement an IP strategy but then fail to set out clear terms on which that IP can be used. This is a particular issue for software and online business but it reaches across a range of sectors.

Investing in an IP strategy but then not controlling how others use that IP (e.g. through effective licensing) is a bit like investing in a top of the range security system for your car and then leaving the keys in the ignition.

It’s not just commercialisation of IP in this way which needs consideration but also whether there are any opportunities to be imaginative in having IP generate revenue for a business. Many businesses will register their IP and then do nothing with it (unless they need to rely on it to deal with an infringer. By doing this, they may be missing an opportunity to let the IP work for them, for example, in manufacturing or licensing deals.

Intellectual Property Advice for SMEs

Many will also overlook that IP can add value to the bottom line. Whilst it is common for businesses to value their tangible assets, valuation of IP (which is often more valuable than the tangible assets) can be easy to overlook however, I would urge you to take advice.