Page last updated at 23:50 GMT, Wednesday, 10 March 2010

Intellectual property is not a luxury

By Julian Nolan
Intellectual property expert

Circuit board
Many small firms have patents in place

In the fight for cash and perhaps survival during tough economic times, it is easy to dismiss intellectual property (IP) as a luxury.

Yet as something that can help you defeat competitors and extend profit margins, IP - such as patents or trademarks - can be a key ally.

These all pervasive assets flow throughout your business and underpin its knowledge in a way which can be used to establish a unique and sustainable competitive advantage.

This explains why, as the economy slowly recovers, IP can not only be a possible source of cash savings, but also provide incremental income for your business.

Companies may well want to scrutinise their intellectual assets and understand opportunities to save cash and generate additional business benefits.

Spring clean

Useful as they can be, patents do cost money, however, not just when they are filed, but throughout their life as additional fees become due.

Dollar bill and 20 note
Reviewing its IP provision can save a firm money or raise more

The constant evolution of your business may mean that some patents, which perhaps looked promising when filed, are no longer relevant.

Accordingly, it makes sense to frequently review your portfolio for business relevance.

Generally, at least 50% of the patents held by a company may not be needed to support its business.

Something else to consider in any diligent spring clean of IP is cash-flow management. Make sure you receive the royalties, down-payments, option or milestone payments you are owed when they are due.

Licensees that have just struggled through a recession often request longer credit terms, and these need to be carefully managed if they are to be prevented from passing on their problems to your business.

On a related subject, incremental income can sometimes be generated by making sure you get what you are owed. Some patent licensees, usually quite innocently, pay the wrong amount.

An audit can help identify whether you've been paid what you are owed. Some firms offer this service on a "no win, no fee" basis.

'Free up time'

When it comes to developing new products, many large international companies, such as Procter & Gamble and Nestle, actively acquire some of the technology needed for new products from third parties.

[it] may help your business cash in on the end of the recession and enter the economic recovery in fighting form

Small companies can, however, also benefit by adopting a similar "in-licensing" approach for technology that has been researched at third party research and development laboratories, such as those at universities, companies and government research institutions.

Very often this allows new products to be brought to market more quickly, and at less initial cost, than might otherwise be possible, and perhaps be used to compensate for any reduction in your product development budget during the recession.

At the other end of the product lifecycle spectrum, mature or legacy products can sometimes take up a disproportionate amount of business management and engineering time.

Very often it is necessary to maintain these older products because of customer commitments or dependencies linked to other - more current - core products.

One idea to consider is whether the IP behind these old products can be licensed out, and perhaps combined with a related supply agreement so you are able to support your customers.

This approach can help to free up management, engineering and production resources as well as sometimes producing a nice boost to related margins.

Finally, if you already have licensing deals for some of your IP, then consider whether repeat deals may be possible.

Multiple licenses with the same customer generally cost less to execute and are less risky.

This can be a good starting point to increase licensing revenue, which in turn may help your business cash in on the end of the recession and enter the economic recovery in fighting form.

Julian Nolan is co-founder of technology business Patrious.

To ask Julian Nolan a question about intellectual property, use the email form below.

Alternatively, you can email another member of our small business and entrepreneurship panel of experts by clicking on one of the links on the right.

Your E-mail address

The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide.

Print Sponsor

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific