You Should Be Safeguarding Your Innovations
The following article was written by Narayan Subramanian, PhD, senior manager, Front End of Innovation, at the Polsky Center, and originally published in Crain’s Chicago Business on August 19, 2024. Read the original article.
Look around, and you’ll see intellectual property — or IP — everywhere.
The hardware and software of your computer are protected by patents. The logo on your device is a trademark. Software like your web browser is copyrighted. Even your cup of coffee from Starbucks is tied to several types of IP protection. Intellectual property surrounds us, yet we often overlook its presence.
IP rights create a protective wrapper around intangible assets, locking in value and making them tradeable. Without IP rights, investments in developing new products and processes are at risk, akin to cultivating a beautiful garden without a fence to keep out rabbits.
Understanding intellectual property
Patents: These protect technical inventions involving science or engineering. Patents, which typically last 20 years from the earliest filing date, are country-specific. They prevent others from copying your invention, but require renewal after their term ends.
Trademarks: Trademarks can be words, names, symbols, logos, phrases, designs, fragrances, colors, sounds or shapes. They hold brand value, allowing you to charge a premium for your product. An example is Usain Bolt’s trademarked “lightning bolt” victory move.
Copyrights: These protect creative works in tangible form, such as music, images, videos, computer codes and literature. Copyright lasts for the author’s life plus 70 years.
Trade secrets: Unlike other IP forms, trade secrets don’t require formal registration. Protection hinges on reasonable efforts to keep the information secret, such as confidentiality agreements and internal protocols.
Common IP challenges for small businesses
Illinois has 1.2 million small businesses employing 2.5 million people, yet many neglect IP protection. A 2021 study found less than 9% of small and medium-sized enterprises owned any major IP rights, compared with nearly 60% for larger firms. The common reasons for this disparity are lack of awareness and perceived high costs.
Here’s the value of IP protection for small businesses:
- Demonstrates innovation: A robust IP portfolio, particularly patents, signals innovation and uniqueness to investors.
- Creates barriers to entry: Protecting IP deters competitors, making the business more attractive to investors.
- Increases company valuation: IP assets enhance business value and future revenue potential.
- Offers collateral for financing: IP can be used as collateral for loans, expanding financing options.
- Shows business acumen: Protecting IP demonstrates strategic management and foresight.
Steps small businesses can take to protect IP
Small businesses can balance the cost of IP protection with other business expenses by taking a strategic and prioritized approach:
- Categorize your business: Determine if your business is service-oriented, product-based or a mix, and identify its unique strengths.
- Identify key IP assets: Protect crucial assets like secret recipes, brand names or key innovations.
- Start small: Begin with basic protections and expand as the business grows.
- Lock down domain names early: Secure domain names for your brand and potential future products.
- Utilize automatic protection: Works in tangible form, like music or literature, are automatically protected by copyright.
- Seek professional advice selectively: Use IP attorneys for complex issues and manage simpler tasks internally.
- Budget for IP protection: Treat IP protection as an essential business investment, not an optional expense.
Failing to protect your IP risks losing your innovations to competitors, leading to substantial revenue losses. Protecting IP not only safeguards your creations, but also enhances business value and future revenue potential.