IP Checklist: What do buyers or investors look for?
As a business you will likely have a wealth of Intellectual Property (IP) that you rely on for your success and it may well be the most valuable asset. Whether it’s a unique brand name, a creative design, a patentable invention, or confidential information that gives you a competitive advantage, it’s essential to protect your IP rights.
When it comes to securing investment or selling your business, potential buyers or investors will want to know that your IP is protected and that you have the right to use and exploit it. Too often companies fail to protect their IP and miss out on a vital cash injection or fail to realise the company’s full value.
To help you prepare for these conversations, we’ve put together a checklist of 4 key areas buyers or investors look out for:
1) Registered IP Rights
Having registered IP rights can provide numerous benefits. Specifically, trade marks, registered designs, and patents all provide protection against competitors who may try to imitate or copy your products or brand.
Trade marks protect your brand identity, such as your company name, logo, and tagline. A registered trade mark gives you the exclusive right to use the mark in connection with the goods and services you offer. This can help you prevent others from using similar marks that could confuse customers.
Registered designs protect the visual appearance of a product, such as its shape, colour, and texture. This can be particularly important where the aesthetics and design of a product play a significant role in its appeal. Having a registered design can prevent competitors from using a similar design for their products.
Patents protect new and innovative products, processes, or inventions. A patent gives you the exclusive right to make, use, and sell the invention for a set period, usually 20 years. This can help prevent others from copying your invention maintaining your monopoly for the life of the patent, ensuring your competitive advantage in the market.
Registered rights provide value to the assets they protect and give confidence to any purchaser or investor in the strength and longevity of the IP.
It is important than any registered rights you have are registered in the name of the company and not in the name of an employee, director, or shareholder.
2) Copyright and the common pitfall of third-party contractors and commissioned works
Copyright protection arises automatically when a work is created, such as a piece of art, a literary work, or a musical composition, however those rights are put in the hands of the author of those works unless transferred. This covers artistic works used in website design, digital media, promotional materials, and the design of logos themselves. It is therefore important to ensure that you have the right to use and exploit the copyright in any works created for your business.
If you use third-party contractors to create works for your company, such as a freelance designer, writer, or photographer, you should ensure that you have a written agreement in place that explicitly assigns the copyright to your company. This will ensure that you have the right to use and exploit the work without any restrictions. If you have not secured the transfer of such rights within the contract or via a separate assignment, then you may not own the work or have the right to fully exploit it. This would be a concern for any potential purchaser or investor.
It’s also important to understand the rules around employees and copyright. In the UK, copyright in works created by employees during their employment will usually belong to the employer, unless there is an agreement to the contrary. However, it’s always a good idea to have a written agreement or a explicit clause within their contract of employment that confirms the ownership of copyright in any works created by employees to avoid disputes. It is also important to note that this statutory transfer of rights from employee to employer does not apply to directors and/or consultants and so in those cases there is an even greater need to have express written agreements.
If you have concerns that historic work has not had assignment of IP rights, it is possible to rectify with a separate assignment agreement. It is wise to remedy the position as soon as it becomes apparent and well in advance of any sale or investment round to maintain your bargaining position and avoid any delays.
3) Domain Names and the need to have the ‘co.uk’ and ‘.com’ variants
Domain names can be an important part of your brand identity, and it’s important to ensure that you have the right domain names registered for your business. Specifically, you should ensure that you have both the ‘co.uk’ and ‘.com’ variants of your domain name registered.
The ‘co.uk’ domain is the most commonly used domain in the UK and is generally preferred by UK-based customers. The ‘.com’ domain is more commonly used internationally, but having both can help to protect your brand from competitors who may try to use a similar domain name and infringe on your rights.
Depending on your registered trade marks, you may be able to prevent others from registering domains names that are similar to your trade mark, and in many cases, it is advisable to have a enforcement programme which monitors registered domains to ensure any potentially infringing domain names are caught immediately to prevent harm to your business. For some brands, purchasers/investors will want to see that these enforcement “watch services” are in place and that the business has a history of brand protection.
4) Know-How and Confidential Information
Finally, it’s important to protect any confidential information or know-how that gives your business a competitive advantage. This could include trade secrets, customer lists, manufacturing processes, or other confidential information.
To protect your confidential information, you should ensure you have non-disclosure agreements in place with any third parties who have access to this information, such as employees, contractors, or investors. You should also make appropriate and robust security measures that you are able to demonstrate effectively to any potential purchaser/investor.
Whilst there are a number of other areas a potential purchaser or investor will consider when valuing your business, these are 4 key areas most important to get right early, to ensure the continued success of your business and when the time is right, realise its full value.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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