British Science Week: IP Considerations for Early Growth of a Business

This is the first in a series of articles exploring how intellectual property (IP), and in particular patents, can support growth of your business.  The first part investigates the importance of patents in early-stage growth of a business, and the ways in which innovation may be captured and recorded in your company.

Innovation and creativity are at the heart of any technology-led business, especially those in their early stages of growth.  Studies have shown that companies that curate a healthy patent portfolio have a much higher chance of survival over a five-year timeframe.  Furthermore, on average, a start-up is over twice as likely to IPO, merge or be acquired within 10 years of initial VC investment, if it holds patents prior to that investment.  Although there is a growing awareness of the importance of securing IP, and in particular patents, many small business owners still struggle with the process of protecting their innovation in a way that supports growth.

The importance of protecting your innovation

During the initial stages of growth, IP is often one of the most important assets for a company.  From the offset, it is important for start-ups and SMEs to understand the purpose of obtaining a patent, and what impact it may have on their business.  A patent offers more than a market monopoly allowing the owner to take legal action against a competitor’s unauthorised use of their invention.  Many of the other advantages of patents are perhaps of more interest to smaller businesses, particularly those yet to place a product on the market. 

It is common to leverage a patent portfolio to attract early investment, especially VC investment, as it provides a degree of confidence that the investor will may see a return on their initial outlay.  This may come from securing a market for a product currently undergoing development, or by making the company more attractive to later series of larger investments.  Similarly, public funding – a key source of often overlooked early-stage funding – may be more accessible if a patent portfolio can help convince a funding body that a company has a good chance of success. 

As a business grows, a healthy and purposive patent portfolio may open the door to collaboration opportunities either through partnerships or licensing deals.  This generates additional revenue streams and increases product market penetration, perhaps in territories inaccessible to the patent owner.

Capturing your innovation

It is a continual challenge for a business to identify and track the development of their innovation.  Having a process for capturing innovation is a good place to start.  The aim of “Innovation Capture” is therefore to identify, record and assess ongoing innovation within a company.  This can be a relatively straightforward process, for instance having key members of the team meet and simply write down what they have been doing and why. 

It is important to note the background to the innovation.  Why is this area being targeted?  What is the problem being solved?  This is likely well-known to the team members, but recording it will emphasise its importance in supporting the business strategy.  Next, consider how the invention works.  What has been done that is different?  And what advantages do those differences provide?  This not only helps you to identify your product’s competitive edge, but is also forms the basis for the innovation’s patentability. 

Other notable considerations include commercialisation strategy and competitor analysis, both of which are essential to securing a profitable product. 

Ownership and Inventorship

When capturing innovation, it is important to understand who owns it, and where a company wants the associated IP right to reside.  Inventorship can often be a nebulas concept, and it may be challenging to correctly identify inventors, particularly when considering the organic growth of most innovation within a team.  In patenting terms, inventors are generally considered to be those people responsible for the underlying patentable concept at the heart of the innovation. 

Inventors are the initial owners of the related patent rights, but laws governing transfer of ownership of employee-derived innovation differ between countries.  For instance, in the UK if an employee is expected to innovate as part of their work, then the related patent rights typically transfer automatically to the company that employs them.  IP clauses in employment or consultancy contracts, and inventor declarations may also be used as evidence of the transfer of IP rights to a company.  Irrespective of the way in which the rights are transferred, it is important that clear documentation exists to show the flow of rights from the inventor to a company.  As such, an incomplete or incorrect “chain of title” may be catastrophic to the validity of patent rights – the correction of which may not be possible at a later date.

At GJE, we have a wealth of experience in providing strategic IP advice to enable growth of your business, and help it to flourish.  For more information, please see contact details of the authors on their web profiles: Ian Jones, Samantha Wallworth, Brenna Howley, Kessia Hawkins, Tom Blackburn, Amy Mead.