N. 41, January - March 2009 
Editorial 

IP in business: the tale of the three big questions
Jeremy Phillips
Professorial Fellow, QMIPRI
Intellectual Property Consultant, Olswang

 
For 150 years, from the birth of mass-manufactured consumer goods in the 1850s until the dot.com crunch at the beginning of the current millennium, the main focus on intellectual property has been market-based. In jurisdictions rich and poor, industrialised and agrarian the three big questions asked by businesses are the same: (i) how do I stop other people copying me, (ii) how can I sell others the right to copy me and (iii) how can I make sure that other people can’t stop me in the meantime?

How different are things now. Only a few short years into the 2000s businesses still ask three questions—but increasingly they are different ones: (i) can I afford IP protection, (ii) how can I finance my business activities and (iii) where and how can I borrow what I need in order to run my business? Let us look at each of these in turn.

The cost of IP protection is important, particularly for small businesses, since money spent on acquiring IP rights is often seen as “dead”. Most patents are never infringed; nor are most trade marks and designs, and the cost of obtaining them is seen as a write-off. More than one innovating business has observed with sadness that the banks, the accountants, the patent attorneys and the other professionals hired to help launch a new project get paid whether that project succeeds or not. It’s only the innovator—who pays them—who will only see a return on his venture if it succeeds. So cost must be kept down, and it must be viewed as an investment in its own right rather than as an expensive insurance policy against a risk that may never happen.

The financing of business activities is important too, and here the role of IP is flexible. Its existence can make a financier feel comfortable to lend money to a business, or it can induce others to make their own investments at their own risk. Why borrow vast sums to set up a chain of burger bars if, by registering the trade mark and licensing it together with a business format, you can induce hundreds of licensees to borrow for you, giving you royalties for the use of your mark?

The sourcing of funds is difficult too. There is much truth in the statement that banks only want to lend to those who don’t need the money, but IP rights are valuable assets which can be securitised, placed on a business balance sheet to enhance its apparent value, or used as bait when fishing for funds through a share issue or initial market placement.

A glance at the world’s IP legislation shows that there are no old answers for the three new questions. Nor do WIPO treaties and agreements provide much support. But now that WIPO has convened its first IP-and-finance meeting we may be confident that this subject has at least reached the world’s IP agenda.

Jeremy Phillips administers or participates in the administration of several IP blogs including the IPKat blog, IP Tango (IP in Latin America), PatLit (Patent Litigation weblog) and IP Finance.