INFORMAL IP

If you take a look at our Metisology, you’ll notice that only one of our ten key business valuation drivers falls under the category of formal IP. This is because informal IP, while incapable of registration, is equally important in maintaining or driving your company’s competitive advantage. Informal IP is often overlooked in favour of focusing on the more well-known registrable IP rights, i.e. patents, trade marks and designs; however, informal IP still can and should be protected. Trade secrets, one of the informal IP rights currently gaining the most traction in the market, is a viable alternative to patent applications and merits a robust trade secrets policy in order to prevent trade secret leakage. Just think what would happen if Coca Cola’s famed secret recipe was discovered by a competitor! Other informal rights, such as critical customer, supplier and partner relationships can enhance the value in your company’s brand and reputation, whereas organisational knowledge and business processes can make your company more valuable in the eyes of prospective investors and buyers, and can help your business realise a greater valuation upon exit.

Trade Secrets

A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers.

Organisational Knowledge

Organisational Knowledge is company’s “know-how” which has been developed and documented in written form to be shared across the company as a whole. This may take many forms, including training programs, systems and procedures, technical specifications or drawings.

Proprietary Software Code

Proprietary Software Code is a piece of software that is owned by the person or firm who has developed it, with reduced ability to see or change the source code (and is the opposite of open source software). There are restrictions in place regarding its use, and the source code for the software is a closely guarded secret. Software code can be very valuable, but is often hard to patent, meaning that it can lack the protection that registered IP receives.

Critical Partners, Suppliers and Customers

Strong customer relationships are integral to an organisation and may well be the trigger for acquisition by a third party. IP assets within this area are of greatest value when there is an element of uniqueness, or where they serve as a barrier to entry to competitors.

Research and Development

R&D/Innovation is the process of developing and commercialising new ideas, implementing new processes or changing the way the business makes money. It can also be viewed as the activities required in order to keep the business competitive and sustainable in the long term. This includes research, new product/service development, new process development, continuous improvement and new business models.

Brand and Reputation

Brand and Reputation is often the most valuable and visible IP asset of a company. A company’s brand, represented by its logo, product ranges, style and marketing campaigns, enhances a company’s reputation and identity within its chosen trading market and differentiates it from its competitors.

Strategy and Market Intelligence

Market Intelligence is market analysis focusing on the total environment in which a business operates, including information on its competitors and possible new entrants to the market. This can be particularly valuable in the context of a company’s  patenting strategy, as it would need to be diligent about keeping abreast of competitor patenting activities which may undermine future/planned patents. Furthermore, strategy and market intelligence is important for the timely reporting of vital knowledge affecting areas of strategic, tactical, and counter-intelligence decision-making, and can be applied operationally and strategically in respect of the organisation’s strategic interest for the market in which it operates.

Know-How

Know-how can be defined as confidentially held – or better yet – closely-held information in the form of unpatented inventions, formulae, designs, drawings, procedures and methods, together with accumulated skills and experience in the heads and hands of a firm’s employees. Know-how can assist a transferee/licensee in the manufacture and use of the target product or technology, and it can be further supported with privately-maintained expert knowledge on the operation, maintenance, use/application of the object product and of its sale, usage or disposition. But know-how also poses a risk in that, being held by individuals rather than the firm as a whole, it is not an asset of the company and is therefore liable to leave along with an employee.

Photo credit: Saad Faruque