Module 2 - IP Protection and Your Business
Lesson 1: Does Your Business Need IP Protection?
Reading time ~5 minutes
Introduction
If you are a new business, or if you have been in business but have not yet taken steps to protect your intellectual property rights (IPRs) at home and abroad, you may be unsure what IP rights your business has to protect. If you feel you do not have an adequate understanding of your business's IPRs, you are not alone. For example, a study performed by the U.S. Patent and Trademark Office shows that 85% of businesses do not understand that U.S. patent and trademark registrations do not provide intellectual property (IP) protection in overseas markets.
On the next screen, there is a questionnaire that will enable you to assess the nature of your business's IPRs.
Needs Assessment: Does Your Business Own IP?
To determine the types of IPRs you may need to protect:
- Click the Assessment link below.
- Answer the questions on the assessment and click the Submit button.
- Based on your responses to the questions, you will receive feedback on the types of IPRs that may be applicable to your business. This feedback will help you determine which topics in the course will be most helpful to you.
Conducting an IP Audit
Before you can take effective steps to protect the IPRs of your business, you must have a complete understanding of the nature and value of your IP. The best way to achieve this understanding is to conduct an IP audit of your business.
An IP audit is a systematic review of the IP owned, used, or acquired by a business. The goals of an IP audit are to:
- Identify all the IP owned or used by the business
- Consider appropriate ways to protect the IP owned by the business
- Provide the information necessary to value these intangible business assets
As a small business owner, you may conduct an informal IP audit using publicly-available information (see examples of sources in the Resource Center). Consider using the advice and input of an IP attorney to help you develop your IP strategy. A financial advisor also can help you determine the commercial value of any particular IP asset that may influence your IP strategy.
Importance of an IP Audit
An IP audit provides numerous important benefits for a business. For example, it:
- Forces a business to think about and identify the IP assets it owns and the strategies that may be used to protect each asset
- Forces a business to consider the extent to which it relies on others' IP, evaluate its licenses, and explore the need to develop its own IP
- Provides the information necessary to ensure that adequate steps are being taken to protect all IP assets
- Provides the information necessary to value IP assets that may be an important component of the business’s overall valuation
- Can help a business increase its cash flow by licensing IPRs to a third party
- Can help a business identify possible assets that could be used as collateral for financing
- Supports cost-benefit analysis of enforcement decisions
- Reduces costs by eliminating costs associated with obsolete IP
- Assists in ensuring proper use of others’ IP
- Assists in ensuring proper use of the business's own IP
- Assists in determining how tax payments should be made (some countries allow property taxes to be amortized over the life of the asset)
Third-Party IP Assets
An IP audit also enables you to ensure that any use by your business of others' IP assets is properly licensed or otherwise authorized by the third party (preferably in writing). Some uses of third-party materials may fall within the "fair use" provisions of trademark and copyright law. Most commercial uses of third-party materials, however, will not.
Valuating IP Assets
The value of an IP asset can be determined by:
- The contribution the asset makes to the business
- Its resale and license value
- The amount invested to develop it
- The amount the business would be willing to invest to protect or enforce against infringement
Mechanics of an IP Audit
An IP audit should cover the business assets that are owned, licensed, or incorporated into a business's products and services. For assets that a company owns, the company should determine:
- The type(s) of IP protection that may be available to protect each of the business's assets
- The countries, regions, or markets where each IP asset needs protection (including the need to protect IP assets against IP theft in connection with the company's website)
- Whether, and to what extent, the type(s) of IP protection identified are available in a particular country
- The duration, or "life," of each type of IP
- The costs of protecting the IP asset in a particular country (and, conversely, the potential costs of failing to protect the IP asset in that country)
- The value of each IP asset to the company and whether it merits protection in a particular country
Click here to see an example of a company's IP audit.
Every business, regardless of size, should conduct an initial IP audit to determine what assets the business owns, whether and to what extent the asset can be protected through IPRs, and in which country or countries the business should consider seeking protection. The frequency with which a company should conduct an IP audit depends upon the size and nature of the business. However, an IP audit should always be conducted in connection with certain events, such as the establishment of a Web site, the purchase or sale of the business, the licensing of IPRs to third parties, or the expansion of the business to new countries, regions, or markets.
Module Summary
You have now completed the Does Your Business Need IP Protection? module. This module has helped you understand whether you have IP to protect and the steps you can take to inventory and valuate those assets. Once you have an accurate understanding of the IP assets owned and used by your business, you can take the steps necessary to protect those assets at home and abroad.
Module 3 of this course will describe the different types of IP rights and will explain the protections available to each. Modules 4 and 5 will provide information about steps you can take to protect your IPRs in the United States and abroad.