For many manufacturers in Australia, Intellectual Property (IP) can be the most valuable asset the business owns. Why? Because IP can be used in a variety of ways to support a business, writes Greg Whitehead in the latest edition of AMT (Australian Manufacturing Technology) magazine.
For many manufacturing businesses in Australia, Intellectual Property (IP) can be its most valuable asset. Why? Because IP can be used in a variety of ways to support a business.
However, after the best part of two decades working within the IP industry and seeing numerous missed opportunities, it remains an unfortunate reality that leaders and key decision makers at many of Australia’s most innovative manufacturing enterprises, particulars SME’s, do not adequately understand the full range of ways in which they can capitalise on their IP.
This is a common theme across Australia’s advanced manufacturing sector, including within our most innovative companies developing highly specialised products and processes in areas such as aerospace and defence, automotive, clean and renewable technology, medical technology, biopharmaceuticals, mining and agribusiness.
All too often the typical ‘understanding’ is that IP is only used “to stop others from copying us”. This results in the limited view that it is necessary to have a hard fought and costly battle in Court to resolve the issue at hand and gain value from an IP portfolio.
Such a narrow outlook adversely limits the potential to maximise the commercial value of innovations and ultimately the value of a company – in short, it potentially reduces the return on R&D expenditure.
This is not to say that a business should or must seek to register all of its IP. Rather, it is incumbent on all business owners and managers to properly consider their company’s IP position so that they can confidently answer the question “Why have you, or why have you not, registered the company’s IP?”
And for a business manager to be in a position to answer this question they must be well-informed and have a clear understanding of the potential means by which they can exploit IP rights to the benefit of the company.
By way of example, some benefits which can be realised with a structured IP strategy/portfolio include:
Recognition as market leader: innovations can take many forms – from incremental improvements in a product to ground breaking developments which create a new standard for a specific industry. For such innovations which become widely used and known throughout an industry, the existence of a corresponding IP portfolio can aid in further enhancing the profile and reputation of the company which produced the developments. This can lead to growth for the business not only by way of increased sales but also by increasing the prospect of winning competitive tenders, particularly those having a relatively long-term supply and/or maintenance contracts. Here the IP portfolio creates confidence and a point of difference for the company at the negotiating table.
Collaborative partnerships: a further potential opportunity that arises from growing a company’s profile and reputation as an industry leader in providing innovative products and services relates to new opportunities to collaborate with third parties. Such collaboration can arise through new relationships as a result of the company’s enhanced reputation within the relevant industry, as well as with existing partners such as suppliers, where the IP portfolio can be leveraged to negotiate better pricing to the benefit of the company owning commercially relevant IP rights.
Growth and expansion without capital expenditure: by registering IP rights for key innovations, a company has opportunities to obtain revenue over and above that generated from its own sales alone. Such additional revenue can be obtained through royalties paid to the IP owner by third parties who license the IP rights. In this way, the IP owner can bring in additional revenue based on the actions of a third party, thereby saving on the expense of establishing new production facilities with additional capital equipment to increase capacity. Here, it is important to recognise that registered IP rights are tied to a particular jurisdiction, which allows technology to be licensed on a state-by-state or country-by-country basis.
For example, a manufacturing companying operating only in the eastern states of Australia, and with no interest in expanding to the west, could license their technology to a companying operating in Western Australia. The Eastern based company would benefit from increased revenue through royalty payments, thereby increasing its return on investment in the R&D which led to the relevant innovative breakthrough. A similar strategy could be employed to license technology to a company in a foreign country outside Australia, particularly where the technology is likely to be adopted widely throughout an industry.
It should therefore be appreciated that the benefits of developing an IP portfolio and associated strategy tailored to the specific needs of a company, more often than not, arise from proactive, collaborative-based actions to leverage greater value from the effort and expenditure undertaken in R&D by the company, rather than battles within the Courts. In other instances, a passive approach relying on the existence of an IP portfolio and associated profile in the market can also bring benefits, where third parties actively reach out to an IP owner to seek authorisation to use the IP under license or make an offer to purchase the technology.
In summary, the key take home message is for business leaders to consider whether their products/processes offer a competitive advantage in the market. If so, some time should be spent considering the company’s IP position and put in place the most appropriate and robust IP strategy – whether by applying to register certain rights (e.g. patents, trade marks) or through controlled management of confidential information and trade secrets.
Finally, it is important to remember that the potential benefits outlined above reside with the true IP owner, and there are IP ownership implications associated with all business relationships – starting from employee contracts and the actions of staff to dealings with third party contractors. Care must therefore be taken to ensure there is a suitable IP clause clarifying ownership in any contract before signing it.
This article was written and first published in AMT (Australian Manufacturing Technology) Magazine in their Feb/March 2019 issue.