When trying to extract value from a company in distress, one area to consider is intellectual property.
But, uncovering the value of a company’s Intellectual Property Rights (“IPR”) during the insolvency process can be a challenging undertaking – with IPR values often turning up in unexpected places.
While precise valuations for intellectual property should be left to those skilled and experienced in such matters, there are certain key indicators to consider when trying to assess the value of the various types of IPRs:
In the UK, patented inventions are protected for up to 20 years. As a general rule of thumb, the longer a patent has left to run, the more valuable it will be. How valuable any specific patent itself may be depends on its nature and possible applications, and should be referred to professional valuation experts to determine. Factors to take into account could include how many similar patents exist, how broad the patent’s application is, and the size of the industry in which the patented process or technology is used.
Trademarks in the UK can exist as registered trademarks, often symbolised by use of ®, or unregistered trademarks, sometimes indicated by ™. In a dispute between the holders of similar trademarks, the owner of a registered trademark acting in good faith will usually succeed against an unregistered trademark owner. Therefore, generally the first indicator of value in a trademark is whether or not it has been registered.
In contrast to patents, a trademark’s fortunes are often dependent on the strength of the business behind the trademark. If the business collapses, the value of related trademarks may do likewise. In an insolvency scenario, the eventual liquidation of a struggling company is often a real possibility. As such, if value trademarks are involved, Insolvency Practitioners (“IPs”) should look to protect these brands early on in an administration. If successfully trading out of the administration does not seem likely, it may be advisable to sell to an interested party before the company’s failure erodes the value of the trademarks it owns.
Like trademarks, designs can be registered or unregistered.
Registered designs are protected for up to 25 years. Similarly to patents, their value is likely to remain even when a business fails. For instance, if a firm of architects becomes insolvent, while it may be difficult to find a party interested in purchasing the trading name of the firm, there may be a market for the architectural plans that firm has developed.
In contrast to patents, trademarks and designs, it is not possible to register copyright protection. However, copyright protection applies automatically to original work that satisfies the necessary criteria. Copyright works can often command extremely high value. For instance, one need only think of a certain boy wizard who has generated a fortune for his creator, her publisher, and the associated film studios to realise the stratospheric heights to which copyright value can soar.
Tracing ownership of copyright can often be a difficult process. But establishing ownership beyond doubt can reap dividends when it comes to selling the company’s assets.
Above are just some of the areas worth investigating for IPR values. These can also commonly extend to confidential information trade secrets, know how, database rights and domain names. For example, for IPs looking to trade a company out of insolvency (perhaps via a Company Voluntary Arrangement), it is also worth noting that some IPRs can be licensed instead of sold outright, which could provide the company with a regular and certain income stream.
Regardless of the value of any particular IPR, the important consideration of any IP upon becoming involved with a company in financial difficulties should be to ensure that ownership of the IPR can be traced to the company. This is because in today’s business landscape, more value can be attributed to intellectual property rights than ever before. “Knowledge is power” as the saying goes, or, to put it more aptly in the context of corporate insolvency, knowledge is value.
If you would like more information or advice please contact Fiona McKerrell, Partner, Corporate Recovery at FMckerrell@hbjgateley.com