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In today’s economy, intellectual property (IP) is one of the most important assets of any business. In some cases, you are even able to make money off your IP. There are various forms of IP rights which can be afforded protection, including:
- trade marks;
- patents; and
- copyright.
Your IP is what sets you apart from your competitors, and you can also make money off of your IP. This article explains the important role that IP rights can play to make your business more money.
Exclusive Use of Intellectual Property
As the owner of any form of IP, you are afforded the exclusive right to use these assets and prevent others from using anything substantially similar. This means that other traders are unable to use, for example, your trade mark or copyrighted material and profit off your hard work. Further, the exclusive right to IP adds value to the specific products or services that you provide. It also enhances the value of your business as a whole.
The exclusive rights awarded differ depending on the specific type of IP:
Copyright
If you create an original work, you are afforded automatic copyright protection once you express that work in a material form.
The automatic right to copyright protection lasts for your lifetime and 70 years after your death.
As an owner of copyrighted material, you have the exclusive right over your work to:
- reproduce it;
- communicate it the public;
- publish it;
- perform it; and
- adapt it.
Trade Mark
A registered trade mark is a beneficial marketing tool for your brand that you can use to promote the goods or services that your business provide. A registered trade mark provides you with ten years of protection which you can renew.
With a registered trade mark, you can advertise your brand without the fear that other people will steal your registered:
- name;
- slogan;
- logo; or
- image.
The exclusive use of a trade mark means that you can prevent others from using the same or similar mark within the same industry as your business.
Patents
The type of patent that you hold will determine the duration of protection afforded. For example:
- innovation patents receive protection for up to eight years;
- standard patents receive protection for up to 20 years; and
- pharmaceutical patents receive protection for up to 25 years.
As the owner of a patent, you have the right to stop others from manufacturing and selling your invention without your permission. You can generate money from your invention by providing an exclusive licence to manufacturers.
Commercialising IP
Another advantage of having the exclusive right to use your IP is that you can decide how you would like to commercialise these rights to grow your business. There are two common ways to make money off your IP.
1. Assigning or Selling your IP
Assigning or selling your IP involves a permanent transfer of the specified IP assets to another individual or business. When looking to sell your business, the sale value can increase if you have a valuable IP. This is much like how a tangible investment increases the sale price of a business.
Assigning your IP to another party means that you will no longer have the exclusive right to use the IP. Therefore, you can request a payment for the assignment of the IP which reflects its market value.
It is important to note that as IP is treated as an asset for tax purposes, any revenue that it generates can trigger tax obligations. We recommend that you seek tax advice before selling your IP and decide on the best option for your business.
Assigning IP rights can also incur within your business.
2. Licensing
As the owner of IP (licensor), you can licence your IP to a licensee in return for some form of consideration. Licensing IP means that you will still retain ownership and control of the IP. However, the licensee can use the IP in a specific way.
IP Licence agreements are commonly found in franchise arrangements. Here, the franchise company will licence the IP rights and business model to the franchisee to ensure brand consistency. The relationship of an IP licence should be governed by the terms of a licence agreement.
Common terms of a licence agreement include the:
- permitted use of the IP;
- type of licence;
- territory where the IP use can be exercised;
- term of the licence;
- agreement on whether the licensee has any right to sub-licence; and
- payment for the licence.
The type of IP licence can be either:
- an exclusive licence, where the licensee has the right to use and commercialise the licensor’s IP to the exclusion of all others;
- a non-exclusive licence, where the licensee has the right to use the IP alongside anyone else who the licensor grants licences to;
- a sole licence, where other licensees cannot use the IP, but the licensor can use their IP.
Key Takeaways
Your IP is a valuable asset and can allow your business to grow and be profitable, and you can make money off your IP if you enact certain strategies. Given the value that IP rights can add to your business, it is always important to consider the various options available. Assigning or licensing your IP involves a lot of different legal considerations that you will need to be aware of. If you have any questions or need an IP licence or assignment drafted, contact LegalVision’s IP lawyers on 1300 544 755 or fill out the form on this page.
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