The value of IP to engineering and manufacturing businesses

Patent attorney, Nic Ferrar, explains some of the opportunities provided by having intellectual property (IP) protection that are often missed by the engineering and manufacturing sectors.

There are wildly differing views about the value of IP protection within industry. IP protection is, at its core, about the ability to prevent others from copying. For some it is one of the most fundamental considerations that underpins the products and services they offer, whilst for others it is a distraction that has nothing to do with the day-to-day running of their business.

Positive impact on share price

One of the key considerations that affects attitudes to IP protection is the size of the company. Large organisations typically understand the importance of IP as an indicator of their ability to sustain or increase profitability, i.e., based on the power of their brand or their ability to innovate. In short, IP protection is known to have a positive impact on share price and so it is worthwhile having an IP budget to make sure those benefits are sustained.

Ability to operate in IP-heavy sectors

The other big factor that affects attitudes to IP protection is the industry in which a company operates. Manufacturing industries such as medical devices, electronics and pharmaceuticals are IP-heavy and it is highly likely that you will stumble into someone else’s patents, trade marks or designs if ever you try to create a new product without doing your homework. It is simply a practicality that you will need to become IP-literate to compete in those industries and avoid costly mistakes. As such there is a fundamental need to build your own IP portfolio to be part of the race.

In more traditional engineering and manufacturing industries, which grew up without the same focus on IP protection, it is often possible to carry on business without significant IP issues arising. More immediate practicalities, such as the cost of setting up production facilities and the stability of existing supply chains can be sufficient to control competition. The mindset that IP protection will be ignored unless it becomes a necessity is not uncommon.

Gain a competitive edge

However, this misses the opportunity that IP protection can offer in those spaces. Precisely because an industry is less crowded with IP protection, there is greater scope to gain a market lead by protecting innovation.

One benefit of IP protection for innovation is the opportunity to win orders for products based on unique product features instead of competing solely on quality and price. This can apply not just to the product but also a manufacturing process.

Tax incentives, funding and investment

The ability to add value to products based on innovation plays to the strengths of UK manufacturers when compared to some other countries that offer a lower cost of manufacture. The UK Government has recognised this and has offered incentives to try to help encourage businesses to protect, and thereby unlock the full benefit of, their innovation. In addition to the R&D tax credits, the Patent Box scheme offers a generous saving in corporation tax for UK companies that have patented their technology. There has also been funding made available in recent years to help start the process by conducting an IP Audit to better understand what IP can be protected and how. For more information on funding for an IP Audit please visit the UK Innovate Edge website page Harness Intellectual Property.

The further benefits of IP protection will depend on specific circumstances. For smaller companies, IP protection can help attract investment to make their commercial plans a reality. Even if the company that developed the new IP does not have the ability to realise its full commercial potential, owning the IP rights opens further options for commercial exploitation by licensing the IP for others to use. When entering new markets overseas, having fundamental IP protection in place, not least registered trade marks, can provide some control over distributors or other collaborators to make sure they do not become future competitors.

Planning your exit strategy

Perhaps the biggest single indicator of the value of IP is seen upon exit, where a huge uplift in the price paid for a company can be derived from its IP portfolio. However, focusing only on the specific financial value of IP at that stage would miss the other benefits that can arise in the meantime.