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20 October 2015 Building your business around innovation

By Eric Ziehlke, Partner

In Brief
 

Innovation is the soil from which all successful businesses grow – not only as start-ups, but even in the mature stage of their life cycles. Unfortunately, however, businesses often fail to identify, value, protect and exploit this innovation at the expense of surging profit and revenue growth. Swaab IP specialist Eric Ziehlke provides a run-down of the methods business owners should be employing in order to make the most of their valuable intellectual property


Innovation in setting business strategy

When a business is setting its business strategy it is generally aimed at achieving strong and profitable growth. Clearly, if you can provide a product to your target market which has significant advantages to those of your competitors, you will have a major competitive edge in that market.


Innovation in generating profitable growth

It is obvious that if you can provide your target market with a unique and superior product package, you will generate sales growth. What is less obvious is that a superior product package enables you to charge a price premium on your product because it has a higher perceived value in the marketplace. You will be aware that the most prominent brands and the most highly sophisticated technologies are rarely provided at bargain basement prices.

The rapid upsurge in on-line purchasing may actually enhance the significance of innovation as represented in well-known brands. Where a product cannot be closely examined by a consumer or does not have the warranty of a physical retail outlet, the consumer is likely to become even more reliant on the perceived quality and innovation of branded products rather than generics.


Innovation as intellectual property

Once the critical connection of innovation to profitable growth is recognised, it becomes necessary to treat that innovation as valuable intellectual property to be fully safeguarded. Intellectual property generally does not appear on the balance sheet of companies. It is often given a somewhat nebulous status under the heading of goodwill in the sale of a business. In fact, intellectual property is an asset which generally appreciates rather than depreciates in value over time. The true value of intellectual property should be based on the serious decline in revenue and profit if that intellectual property is lost. The loss of a major product brand, a key technology patent or software copyright can cripple a business.


Safeguarding intellectual property

As a producctive asset, intellectual property needs to be identified, protected and exploited.

  1. Identification: It is essential to systematically identify all the intellectual property a business holds in the same way as we would identify stock, plant and equipment or real property. We need to identify trade marks, domain names, inventions, designs, copyright and other proscribed statutory rights. We need to determine the ownership of these assets and whether they are encumbered in any way.
     
  2. Protection: The obvious method of protecting intellectual property is to register it and to ensure that the registration covers all relevant rights in all relevant jurisdictions. Certain intellectual property, such as copyright, cannot be registered, so it is important to keep meticulous records on the creation and ownership of that copyright. Rights in inventions and designs can be lost if they enter the public domain, so strict procedures need to be put in place to ensure the confidentiality of those inventions and designs.
     
  3. Exploitation: Once intellectual property is identified and protected it can then be fully exploited. One important method of exploitation is to bring the benefits of the innovation to the attention of your customers. This promotion of innovative benefits can not only increase the sales of your products but also justify charging price premiums on those products.


Conclusion

Innovation is clearly essential for the growth and development of a start-up business. However, innovation is also critical for the growth and development of mature businesses as well. Much of the innovation in a mature business already exists. It merely needs to be identified, valued, protected and exploited. The result can be surging profit and revenue growth.


For further information, please contact:

Eric Ziehlke, Partner  |  Phone: +61 2 9233 5544  |  Email: ejz@swaab.com.au

If you would like to republish this article, it is generally approved, but prior to doing so please contact the Marketing team at marketing@swaab.com.au

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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