In today’s competitive landscape, intellectual property serves as a vital asset for any business. Despite its importance, many small and medium sized businesses (SMEs) neglect to secure their intellectual property until it’s too late. Intellectual property can be one of the most valuable assets for a business, particularly a SME. Whether it’s a unique brand logo, a proprietary product design or a software algorithm, protecting these assets is crucial to maintaining a competitive edge and ensuring long-term growth.
What are intellectual property rights?
The World Intellectual Property Organization (WIPO) defines intellectual property as ‘creations of the mind: inventions, literary and artistic works, symbols, names and images used in commerce’.
Intellectual property rights include various forms of protection, such as trademarks, designs, patents and copyrights. These rights cover everything from business logos and names to software, website designs and databases.
At a fundamental level, protecting the logo and name of a business is essential. On a broader scale, intellectual property transforms ideas into valuable commercial assets that can significantly impact the path of a business.
The importance of intellectual property for SMEs
Small businesses and start-ups often lead in innovation, as they invest significantly in research and development and bring new products to market. Intellectual property protection is crucial for SMEs because it safeguards their unique innovations and ideas, preventing unauthorised use or duplication by competitors. This protection not only secures the competitive advantage that comes from exclusive right to products, services or creative works but can also enhance the credibility and market position of a business.
By establishing legal ownership of intellectual assets, SMEs can attract investors, build customer trust and create opportunities for licensing and partnerships, which are essential for growth and long-term success. Moreover, robust intellectual property protection can be a critical factor in the valuation of a business, particularly when seeking funding or preparing for mergers and acquisitions.
For small businesses, every investment must be carefully considered and intellectual property is no exception. However, the cost of not protecting intellectual property can be far greater than the initial investment.
Types of intellectual property protection:
- Trade marks
A trade mark, as defined by WIPO, is ‘a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises’. Trademarks can include logos, words, sounds, colours and shapes, provided they are unique and not misleading or offensive.
SMEs are strongly encouraged to register their trade marks to ensure comprehensive legal protection and safeguard their brand’s distinctiveness in the market. However, unregistered trade marks do have limited rights.
Registered trade marks:
Trade marks can be registered:
- Nationally – in the operating country of a business;
- Regionally – e.g., through the European Union Intellectual Property Office;
- Globally – on a country by country basis individual countries; or
- Through the WIPO Madrid System – a centralised system which covers 130 countries.
The term of trade mark protection can vary. Trade mark registration lasts for 10 years in the UK and can be renewed every 10 years. Once registered, the trade mark’s owner has the exclusive right to use that trade mark. A registered trade mark offers strong legal protection and an exclusive right to use the mark, significantly enhancing a business’s ability to prevent others from using or imitating its brand.
When deciding whether to register a trade mark locally, regionally or internationally, SMEs need to consider where they plan to expand. If a business is primarily local, a national trade mark may suffice. However, if there are plans to expand into new markets, it might be worth exploring regional or international registration options. SMEs should consider starting the trade mark registration process as early as possible, as registering a trade mark not only protects its brand from being used by competitors but also enhances its brand’s credibility in the eyes of customers. This proactive approach can prevent costly legal disputes down the line and ensures that the brand is protected wherever the business may grow.
Unregistered trade marks:
Limited protection is provided to unregistered trade marks through the common law doctrine of ‘passing off, which protects unregistered trade marks that have built a reputation and goodwill in the market. To successfully establish a claim, a business must prove:
- Goodwill: the positive reputation and customer connection of its trade mark with the business;
- Misrepresentation: another trader’s actions have caused or are likely to cause confusion among customers; and
- Damage: actual or potential financial loss due to the misrepresentation.
A claim for passing off can be difficult and expensive to prove, and often requires a large amount of evidence.
- Design
Design registration safeguards the visual aspects of a product, including its decoration, colour and shape. This registration is initially valid for five years and can be renewed in five year intervals, extending up to a total of 25 years. After the registration period expires, the design enters the public domain, allowing others to use it without restrictions.
For SMEs in industries where visual appeal is crucial, such as fashion and consumer products, design registration can provide a competitive edge. As SMEs often face stiff competition from larger companies, protecting unique designs through design registration can help SMEs maintain an advantage. This not only prevents others from imitating a business’s products, but it allows the business to capitalise on its creativity – whether by licensing its designs or using them as a cornerstone of brand identity. Over time, a portfolio of protected designs can significantly enhance the value of a business.
- Copyright
Copyright protects original works from being copied, adapted or performed without authorisation. This form of protection extends to a wide array of creative outputs, such as artworks, literature, software and databases. In the UK, copyright is automatically granted and generally remains for 70 years following the creator’s death, controlling the distribution and public use of the work without permissions.
Numerous licensing organisations, including PRS for Music, PPL and NLA oversee copyright management on behalf of creators. A full list of these licensing bodies is available on https://www.gov.uk/guidance/licensing-bodies-and-collective-management-organisations.
Even if a business isn’t traditionally seen as ‘creative’, copyright can still play a vital role in protecting intellectual property. For example, a small tech company may use copyright to protect its software code, or a data analytics firm may use copyright to protect its proprietary database structures. Understanding how copyright applies to a business can help it safeguard the valuable resources that are key to its competitive advantage.
- Trade Secrets
A trade secret is business information that is valuable and confidential, such as secret formulas or proprietary methods. They are protected through both non-disclosure agreements (NDAs) and confidentiality agreements. Notable examples include formulas for Coca-Cola and KFC’s original recipe.
In the UK, the Trade Secrets (Enforcement, etc.) Regulations 2018 introduced the EU Trade Secrets Directive (2016/244/EU) into UK law – both of which aim to create greater harmonisation in respect of the law relating to trade secrets.
Trade secrets can be particularly valuable for SMEs. Small businesses should implement NDAs and confidentiality agreements with employees, contractors and business partners to protect sensitive information. For many SMEs, trade secrets include not just recipes or formulas, but also customer lists, business models and internal processes that give the business its unique value. By carefully managing who has access to this information and ensuring that proper agreements are in place, the risk of this information being leaked or stolen can be minimised.
- Patents
Patents grant inventors exclusive rights to produce, sell, use or import their inventions for a fixed period, usually 20 years. To qualify for a patent, an invention must be original, non-obvious and functional. Once the patent has expired, the subject matter of a patent enters into the public domain.
The UK is a popular initial filling location of patents before seeking broader protection through European or global patent offices. This strategic move helps innovators secure their ideas in multiple markets, enhancing their commercial potential.
For SMEs, patents can be more than just a legal safeguard – they can be a key driver of business growth. A patent can lead to licensing opportunities, partnerships or even acquisition offers. It’s essential to evaluate the long term benefits of a patent, as it can open doors to new revenue streams and help establish a business as a leader in innovation.
Suggestions for SMEs wanting to protect its intellectual property:
- Developing a robust intellectual property strategy is essential for managing and safeguarding intellectual property assets. SMEs can benefit from creating a simple intellectual property checklist, which should outline its key products, services and creative works. It should then assess which of these are unique and determine the necessary level of protection required. For start-ups, the level of protection required should be assessed at each development phase. This approach ensures the business is not leaving valuable assets vulnerable as the business grows.
- Think of intellectual property not as a separate legal issue, but as a core part of business strategy. By regularly reviewing the business’s intellectual property assets and ensuring they are aligned with the business’s goals, a competitive advantage can be maintained and market opportunities maximised.
- Education is key to managing intellectual property effectively. Ensuring all employees understand the importance of protecting intellectual property assets, from new product designs to customer data, will not only help protect these assets but will foster a culture of innovation and responsibility.
- Thorough documentation of the conception and evolution of intellectual property is important. Keeping detailed records can resolve potential ownership conflicts, particularly when key team members depart from a business.
- Regularly monitoring competitors is crucial to ensure intellectual property rights are not violated and help protect a business’s investment.
- For established SME’s, conducting a periodic intellectual property audit is key to managing and renewing necessary protections. Explore global protection options and implement comprehensive shareholder agreements to mitigate future disputes.
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